S&P 500 above 4,400 leaves no room for more gains: Citi

BLOOMBERG

The bull-market rally in US stocks is about to run out of steam, according to Citigroup.
Strategists at the bank led by Scott Chronert reiterated their call for the S&P 500 Index to tumble to 4,000 by year-end, and initiated a new target of 4,400 by mid-2024, or just below June 16’s 4,410 close. A lack of concrete earnings revisions and a looming US recession will catch up with ballooning share prices, while many key measures of investor psyche suggest wariness around the S&P 500’s latest breakout, Chronert wrote in notes to clients. The Levkovich Index, a sentiment gauge, remains in “panic” territory at -0.18, while his team called the equity flow backdrop “putrid.”
“Combined, this implies this move above 4,400 on the S&P 500 is relatively unloved,” he wrote. Even as equities have defied naysayers in recent months, Chronert remains among a chorus of Wall Street bears unconvinced the rally has legs.
Bank of America Corp’s Michael Hartnett said that it was unlikely that a “brand, new shiny bull market,” is underway, comparing the current setup to 2000 or 2008. Prominent bearish voices like Morgan Stanley’s Mike Wilson and JPMorgan Chase & Co’s Marko Kolanvovic have also doubled down on their downbeat forecasts.
It’s a pivotal moment for Wall Street strategists tasked with predicting where the stock market will go after the consensus bearish outlook heading into 2023 failed to come to fruition. The common view was that stocks would drop in the first half and recover to end the year little changed from late 2022 levels. Instead, the S&P 500 is up about 15% year-to-date and the Nasdaq 100 nearly 40%.
While big names including BofA’s Savita Subramanian and RBC’s Lori Calvasina have modified their calls, those who remain adamant a downturn awaits are in for a big test as the second half of the year gets underway.
“While acknowledging we missed the AI euphoria to grip mega cap growth cohort, lack of concrete earnings revision support implies a digestive phase” in the second half, Chronert wrote. “As enticing as it may be to follow the tape and nudge our year-end target higher, we just do not see the fundamental justification for this, yet.”