Major U.S. stock indexes have rallied this year but the bear market isn’t over and “it’s too soon to price in a recovery,” according to a midyear outlook report from Citi Global Wealth Investments.
Citi Global Wealth is favoring defensive equities while expecting rolling recessions across U.S. sectors amid low economic growth. Its midyear report shows a forecast for 1% real growth in U.S. gross domestic product in 2023 followed by a 1.4% expansion in 2024. “We do believe that we’re close to peak interest rates,” said Bitterly. The Fed has aggressively raised rates since March 2022, with its policy rate now in a target range of 5% to 5.25%.
“Even just extending out to five years can create some really balanced portfolios and some sustainable income,” said Bitterly, pointing to opportunities in Treasurys, investment-grade bonds or municipal debt. “This idea that all of a sudden you’re going to pick this ideal entry point to then get back into equities in a material way, or get back into risk assets, is a really, really tricky and difficult proposition,” said Bitterly.
With the U.S. dollar likely weakening from its surge in 2022, international equities present investment opportunities from a currency perspective as well as from a valuation standpoint, said Bitterly.