Citi expects world stocks to trade sideways for a year, suggests defensives

SINGAPORE: World stocks will probably tread water for a year, according to Citi strategists, who recommend a more defensive portfolio in the face of the fallout from the coronavirus pandemic.

Citi equity strategists are recommending clients play it safe by holding US stocks and healthcare shares and reducing exposure to bank shares, as earnings are likely to take a while to recover from the coronavirus fallout.

"The bullish push from US$6 trillion (RM25.7 trillion) of global quantitative easing is likely to cancel out the bearish drag from the ongoing lockdown," the investment bank's equity strategists said in a note published late yesterday.

Restrictive measures imposed to contain the virus has ravaged economic activity and hurt demand for risky assets in recent months, but their impact has been offset somewhat by huge asset buying from central banks, which has supported confidence.

"We would not chase markets higher from current levels," the strategists said.

The note forecasts the S&P 500 to be at 3,160 points in mid-2021, about 1% higher than Friday's close. It expects other major markets from Australia to Europe and Japan to be similarly steady.

The outlook is broadly similar to that outlined by HSBC Private Banking last week, and a touch more downbeat than Credit Suisse which is slightly more positive on equities.

Citi said financials will struggle with prolonged low interest rates, and are best avoided, in favour of defensives such as health care. Citi upgraded its recommendation for the materials sector to overweight and downgraded consumer staples.

Meanwhile, global stock markets rallied to four-week highs today as investors counted on a revival in Chinese activity to boost global growth, even as surging coronavirus cases delayed business reopenings across the United States.

MSCI's All-Country World Index, which tracks shares across 49 countries, rose 0.7% to its highest since June 6 after the start of European trading.

European shares jumped, with the pan-European STOXX 600 index rising 1.64%. Stocks exposed to China, like carmakers , industrials, energy firms and luxury goods makers rose strongly, while banks also rallied.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan climbed 1.6% to its highest since February, with the bullish sentiment spilling into other markets. Even Tokyo's Nikkei, which has lagged with a soft domestic economy, managed a rise of 1.8%. – Reuters

Citi expects major markets from Australia to Europe and Japan to be steady. – REUTERSPIX

source https://www.thesundaily.my/business/citi-expects-world-stocks-to-trade-sideways-for-a-year-suggests-defensives-LF2698904