"We're tactically reducing risk": Citigroup has withdrawn its "buy" recommendation on U.S. stocks
The bank also closed its long position in the S&P 500 Equal Weight Index
Citi is not urging investors to flee stocks en masse for safe-haven assets / Photo: Robert Way / Shutterstock.com
Citigroup withdrew its “Overweight” recommendation—equivalent to a “buy” rating—for U.S. stocks and closed its long position in the S&P 500 Equal Weight Index. The bank decided to partially reduce its exposure amid signs of excessive investor optimism, Reuters reports.
Details
Citi attributed the change in its stance to its own POLLS indicator, which takes several factors into account: investor positioning, optimism levels, liquidity, leverage, and market stress. The indicator has now risen to levels that have historically coincided with market peaks, according to Reuters.
"We are slightly reducing our exposure as a matter of strategy," Citi said.
That said, the bank has not yet taken an outright “bearish” stance. Its analysts simply believe that, following a market rally, stocks become more vulnerable to any negative signals. Citi is also not urging investors to flee stocks en masse for safe-haven assets, Reuters notes.
The S&P 500 Equal Weight includes the same 500 companies as the main S&P 500, but each stock has approximately the same weighting. As a result, the largest companies—such as Nvidia, Microsoft, or Apple —have a much smaller impact on its performance than they do on the regular S&P 500. This index provides a better indication of how broadly gains or losses are spread across the U.S. market.
Context
Citi's stance contrasts with Goldman Sachs' assessment. On Monday, October 12, the bank, on the other hand, raised its recommendation for the global stock market for the next three months from “Neutral” to “Overweight,” citing the fact that valuations have become more attractive following the recent pullback in stock prices. Strong corporate earnings could support stocks, which are already trading near all-time highs, the bank noted.
On the other hand, BlackRock , the world’s largest investment firm, also downgraded its rating on U.S. stocks to “neutral” on October 13 , abandoning its long-standing recommendation to maintain an elevated weighting of U.S. stocks in portfolios. The research division, BlackRock Investment Institute (BII), attributed the decision to “potential volatility surrounding the deployment of AI infrastructure.”
This article was AI-translated and verified by a human editor
