This from Citi comes via a Dow Jones / Market Watch piece (may be gated) – in brief:
Citigroup forecasts modest gains for the S&P 500 with a base case of 6,500, a bull case of 6,900, and a bear case of 5,100.High trailing price-to-earnings (P/E) ratios, at their loftiest levels in 40 years, pose a risk to returns and increase volatility.Positive fundamentals, artificial intelligence advancements, and productivity gains are expected to support the market.Confidence in long-term growth remains, but “elevated and unattainable” growth expectations temper optimism.While big tech valuations are high, the remaining 493 S&P stocks also trade at their highest 20-year forward P/E levels.Citi’s Levkovich Index (formerly the panic/euphoria index) indicates a euphoric investor phase, akin to the Tech Bubble and post-pandemic rally.History suggests that starting from such high valuations often leads to lower median returns and higher downside risks.
This article was written by Eamonn Sheridan at www.forexlive.com.
