Citi analysts warn stock market of danger signals, same signals before major stocks crash

Analysts at Citigroup are pointing to significant red flags in global stock markets that previously portended a major crash.

“Indices of global sell-side equity calls have returned to a bullish peak, thus triggering a red light on the bear market checklist. [emerging markets]Less bullish in Europe and Japan, but less so. There are few signs they see a global recession coming,” the strategist said. Note on Twitter.

The index’s bullish peaks were levels reached in 2000 and 2007, after which global stocks fell 50%. This is why Citi has included this red flag in its bear market checklist, analysts say.

However, Citi also acknowledged that the sell signal flagged by the Recommendation Index in 2012 was misplaced as the market remained largely unchanged in the ensuing 12 months.

The index’s bullish peak comes when the S&P 500 index has been rising since mid-June after falling in the first half of the year. Despite the recovery, the index is down more than 13% year-to-date as of his Aug. 9.

In addition to being bullish on the US and emerging markets, Citi analysts are “still bullish” on cyclical sectors. For example, in the last 18 months, net buy recommendations for discretionary stocks in materials and consumer goods have risen the most. Sectors such as telecom services, IT and utilities saw the least gains in recommendations.

However, strategists note that sectoral recommendations have been less successful compared to regional recommendations.

stock market decline

Despite the stock market’s rebound in June, Morgan Stanley’s Michael J. Wilson expects it to be a bad time for the market. He believes inflation will peak and possibly fall faster than expected, but this remains a challenge for the stock market as the situation adversely affects corporate earnings.

‘The best part of the rally is over,’ says Wilson Said According to Bloomberg, it expects corporate profit margins to shrink in 2023 due to cost pressures.

Concerns about the health of U.S. companies were underscored in a recent S&P Global Market Intelligence report, which said the likelihood of default in several business units rose in the second quarter. Default risk was highest in healthcare, followed by telecom services, consumer goods, IT and consumer staples.

Meanwhile, US gross domestic product contracted by 0.9% in the second quarter following a decline in the first quarter.

Naveen Aslapury


Naveen Athrappully is a news reporter covering business and world events for The Epoch Times.