“The Bull Market Just Won’t Die”, Citi Laments As It Sees “Red” Everywhere

The latest note from Citi strategist Robert Buckland is a perfect example of the schizophrenia that has gripped investors in a market that continues to rise, defying all logic. On one hand, Citi calls the S&P rally “unstoppable” adding that “this US bull market just won’t die“, urging clients “don’t underweight the S&P”, while on the other it openly admits the market, on a fundamental basis is very overstretched, admitting that “since 2011, the US market has re-rated from a trailing PE of 17x to 23x.”
What Citi is effectively saying is that this has never been more of a shut-your-nose-jump-in-and-pray-the-central-banks-can-keep-it-all-together “market” (we use quotations because as even Goldman admitted earlier this week, the “market” no longer reacts to economic data but merely to central banks).
Or, said otherwise, buy and pray. And as usually happens when faith is involved, one needs a sermon. Here is Citi’s:
Don’t Underweight The S&P US equities have outperformed strongly in this cycle. This has left traditional valuations looking expensive compared to other markets. The US CAPE of 26x looks especially high compared to the Rest Of World on 16x. The upcoming US presidential election may increase uncertainty. However, the US still looks cheap when we look at FCF yield (4.1% vs RoW 3.5%). This has been the winning valuation metric in this cycle. The US market is also de-equitising as the RoW equitises. Consequently, we prefer to pick our fights elsewhere and remain Neutral US equities.

This post was published at Zero Hedge on Aug 5, 2016.