Buy the dip in global stocks says Citi strategist

investmentnews.com:

It’s the right time to buy global equities after a pullback that brought them to the brink of a correction, according to Citigroup Inc. strategists.

The team led by Beata Manthey said they forecast a 15% advance in the MSCI All-Country World Local Index by mid-2024 given “more balanced macroeconomic risks.” The strategists favor sectors exposed to the economic cycle, so-called cyclical stocks, as they expect a peak in interest rates, a mild slowdown in growth and a gradual cooling in inflation.

“Until recently, our year-end targets implied down markets and increased volatility,” Manthey wrote in a note. “After the last selloff, we see a more attractive entry point. We would buy dips, as advised by our Bear Market Checklist.” That Citi tool measures metrics such as stock valuations, the yield curve, investor sentiment and profitability.

A surge in US bond yields has shaken financial markets in the past few weeks as investors worry central banks will remain hawkish for longer. The MSCI all-country index deepened its slump from a peak reached on July 31 to as much as 9% this week, coming close to the 10% threshold of a technical correction, before trimming some of the declines. 

US technology shares have been hit particularly badly by the jump in yields, as higher rates impose a bigger discount on the present value of future profits, hurting growth stocks with the frothiest valuations. Manthey said that although she does expect rates to remain elevated for longer, growth stocks are now at oversold levels. The strategist raised her rating on global technology stocks to overweight.

Early in February, Manthey correctly predicted that the outperformance of European stocks over their US peers had more room to run due to lower