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Banking turmoil 'likely to have consequences', stay away from U.S. stocks - Citi

Published 28/03/2023, 12:42
Updated 28/03/2023, 12:42
© Reuters.

By Senad Karaahmetovic

Citi analysts reiterated Underweight on U.S. stocks as they believe the banking sector crisis will likely leave consequences.

Invesco KBW Bank ETF (NASDAQ:KBWB) is down 27% in March and Citi analysts warn that the S&P 500 usually “goes where banks go.”

“Sharp selloffs in banks are usually coincident with sharp selloffs in overall equity markets, no doubt because banks are a good measure of underlying economic strength. The banking stress events of the last weeks are likely to have consequences, we stay underweight US equities,” the analysts wrote in a client note.

Citi economists also pointed to a weak set of economic data, including early PMIs, the Philly Fed index, and the Empire PMI.

“The SPX usually does not trade well into recessions and bottoms only well into it. The recent run to 4000 suggests that the market is pricing a soft landing, which is not our base case,” the analysts added.

As far as the sectors are concerned, Citi is Underweight Utilities, Consumer Discretionary, Communication, Financials, and Real Estate.

Elsewhere, the analysts reaffirmed an Overweight rating on UK equities, which is typically a good place to be during periods of market downside.

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