December 3, 2023

U.S. Equities are the most valuable recession assets, says Citi – Money Times

Citigroup’s view confirms a similar judgment from a trading model developed last month by strategists at JPMorgan Chase (Image: REUTERS/Mike Seger).

Stock indices America Quantitative strategists suggest that other asset classes have priced in higher bearish odds and could be on the verge of facing more losses. Citigroup.

” at Actions U.S. markets have priced in the biggest (but not enough) risk of a recession, and earnings estimates have yet to adjust,” strategists like Alex Sanders said Oct. “U.S. bonds have priced in too little risk, but bonds will take some time to react to recession risks in the face of a hawkish Fed. .”

A survey of Bloomberg economists, mostly from Wall StreetThis puts the 12-month probability of a recession at 60%, up from 50% in the previous month.

Standard probit yield curve models indicate a 34% chance, according to Citi, Bloomberg Economics’ Elisa Winger and Anna Wong are more pessimistic and a 100% probability of a recession in the next 12 months.

Citigroup’s view confirms a similar ruling last month. JP Morgan Chase.

US stock markets have been hit this year by signs of stubbornly high inflation and monetary tightening. Central Reserve, which raises fears of recession. Even after US President Joe Biden said a recession would be “very mild”.

After entering a technical bear market in June, the S&P 500, seen as a benchmark, extended its decline this year to 22% by Tuesday’s close. At the same time, the yield on 10-year Treasuries has risen more than 250 basis points since January.

No asset class has the greatest price recession risk, but stocks are highly reflective of this scenario, Sanders and team wrote. “This time it’s unusual because stubborn inflation keeps pressure on fixed incomes, which typically rise when recessionary risks increase.”

They recommend that investors now use trend following as a core strategy because it has worked during recessions and recessions.

However, Goldman Sachs believes stocks “currently do not reflect the risk of a US recession” and recommends a defensive strategy.

“Fair value defenses” include health care companies, basic products and telecommunications services, David J. Strategists like Kostin wrote in an Oct. 18 note.

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