Citibank’s Chief US equity strategist Tobias Levkovich and his team bumped their price target for the S&P 500 index to 2,900 from the previous estimate of 2,700 this year. The upward revision implies a 10% drop in the US benchmark from the current levels of 3,150.
Key quotes
“Barring a big shock, it is improbable to think of a trading range for the S&P 500 in the 2,500-3,000 area, but more likely in the 2,700-3,200 vicinity as the monetary policy will be in place to prevent a 20% or greater decline.”
“We envision volatility for equities as the good news is being priced in and problems are being overlooked.”
“A second wave of debilitating COVID-19 cases that causes either new shutdowns or slower economic recovery would be challenging, not to mention the U.S. elections, but these are not immediate threats, and investors appear to only have short-term time frames currently.”
“We add that margin pressures from trade friction and weak year-over-year trends (despite better sequential activity) also matter.”
“Ultimately, earnings have to come back in a very meaningful way, and the market already is anticipating that likelihood over time.”
“As businesses try to absorb fixed overhead costs during the pandemic, a much higher level of activity is required to generate incremental margins.”
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