Alert iconWarning: Unsupported web browser

In View no longer supports your current web browser version, which means some functionality may be limited. Please update your browser for the best experience before you log in.

close icon
Citi Private Bank logo

Unsupported browser

Our website no longer supports your current web browser version, which means you are no longer able to access this website. Please update your browser to continue.

Continue
Investment strategy
September 12, 2021
2 mins

Capturing market upside in the age of COVID

September 12, 2021
2 mins
David Bailin
Chief Investment Officer and Global Head of Investments
Steven Wieting
Chief Investment Strategist & Chief Economist
SUMMARY

Despite positive earnings news, equity market investors remain worried as the tailwinds of stimulus start fading. But we disagree with conjecture that current broad equity valuations are troubling and still expect gains, albeit at a slower pace with higher volatility.

  • Record high share prices have been “legitimized” by record high profits. The huge corporate profit gains of the past few quarters were critical in sustaining this equity market rally.
  • Present global equity valuations – unlike the late 1990s period – are very different from US valuations. Non-US equities trade at a 25% valuation discount to the US overall. US “value” shares also trade at a similar discount. Both measures are close to their long-term average valuation. Only Tech shares are expensive but have much higher sustainable growth rates.
  • We are far from an economic peak. Absolute EPS gains averaging 7% to 8% in the next 2 years are consistent with positive equity returns. Expect further new records highs ahead, but with gains made at a slower pace with higher levels of volatility.
  • During periods like this - where earnings growth is strong, but slowing - intra-year corrections become more prevalent. They also tend to be shallow. Market timing is a very bad idea during such periods. Corrections are typically short and subsequent returns tend to outweigh the “anxiety” of volatility.
  • Strategies to improve the quality of portfolio assets, focus on the total return from equities including dividends and diversify portfolios to specific emerging markets and to specific segments, are all ideal for this environment. Such a strategy may reduce portfolio drawdowns if and when they do occur, while capturing much if not all of the upside as the economic expansion continues.
CIO Strategy Bulletin

Insights

See our insights and the issues that matter for your wealth. 

View all insights
Market recovery should offset decline in policy stimulus
Steven Wieting
September 1, 2021
Despite supportive announcements, we expect monetary policy stimulus to gradually diminish post-COVID. Hence, we have shifted our allocations within equity markets away from the riskiest firms to those with strong long-term prospects predicated on a wider economic rebound.
Learn more about Market recovery should offset decline in policy stimulus
‘Powell Play’: Investment implications of Fed’s policy
David Bailin - Steven Wieting
August 29, 2021
Fed Chair Jerome Powell’s recent speech focused on achieving maximum employment while downplaying inflation risk. An everything rally followed in its wake, but we believe such inclusive rallies will be increasingly rare deeper into a market recovery.
Learn more about ‘Powell Play’: Investment implications of Fed’s policy
Fed hints at monetary stimulus wind-down sooner rather than later
Bruce Harris - Steven Wieting
August 27, 2021
The Fed’s recently revealed stance was dovish, but only by a few months, as it likely pushed the formal taper announcement from September to November as the US central bank awaits more data.
Learn more about Fed hints at monetary stimulus wind-down sooner rather than later
Reviewing US, UK and China versus rising COVID prevalence
David Bailin - Steven Wieting
August 22, 2021
The rise of Covid and regulatory actions are impacting markets, but we think some concerns are overstated while others are underappreciated. We offer recommendations and delineate trends likely to impact key markets here.
Learn more about Reviewing US, UK and China versus rising COVID prevalence

Insights

See our insights and the issues that matter for your wealth. 

View all insights
If you are a Citi Private Bank client you can check the value of your portfolio by reviewing your monthly statements or, if you use Citi Private Bank In View, by navigating to the Account Overview page via Portfolio → Overview. If you have any queries please contact your usual Citi Private Bank representative.
FINRA icon
FINRA icon
FINRA's BrokerCheck - Learn more about Citigroup Global Markets Inc.'s background

INVESTMENT PRODUCTS: NOT FDIC INSURED. NOT CDIC INSURED. NOT GOVERNMENT INSURED. NO BANK GUARANTEE. MAY LOSE VALUE.

Citi Private Bank is a business of Citigroup Inc. ("Citigroup"), which provides its clients access to a broad array of products and services available through bank and non-bank affiliates of Citigroup. Not all products and services are provided by all affiliates or are available at all locations. In the U.S., investment products and services are provided by Citigroup Global Markets Inc. "CGMI"), member FINRA and SIPC, and also Citi Private Advisory, LLC ("Citi Advisory"), member of FINRA and SIPC. CGMI accounts are carried by Pershing LLC, member FINRA, NYSE, SIPC. CGMI, Citi Advisory and Citibank, N.A. are affiliated companies under the common control of Citigroup.

Outside the U.S., investment products and services are provided by other Citigroup affiliates. Investment Management services (including portfolio management) are available through CGMI, Citi Advisory, Citibank, N.A. and other affiliated advisory businesses. Neither Citigroup nor any of its affiliates provides tax or legal advice.

Notice at Collection | CA Privacy Hub | Tax Compliance & Regulatory Info | CGMI Financial statement | PSD2 API | MAS Electronic Payments Guidelines | Accessibility | Important disclosure | Terms & Conditions  | The Sustainable Finance Disclosure Regulation

To learn about CGMI and Citi Advisory investment business, as well as our relationship with you, please review our Form Client Relationship Summary.

© 2016 - 2021 Citigroup Inc. All Rights Reserved.

FINRA icon
FINRA icon FINRA's BrokerCheck - Learn more about Citigroup Global Markets Inc.'s background