With 40 Million Unemployed, Citi Urges Wealthy Clients: “It’s Time To Buy”
Sat, 06/06/2020 – 11:00
“BTFD,” read Citi’s latest note to its wealthy clients. Alright, it wasn’t that egregious, but it wasn’t far off.
Citi has been telling its clients they are holding “way too much cash” and the bank’s chief investment officer David Bailin has said he has “big plans to help put an end to that”, according to Bloomberg.
The bank released its mid-year outlook, “From Fear to Prosperity: Investing in a New Economic Cycle,” on Thursday which recommends major changes to client portfolios.
Perhaps they weighed the serious consequences of record unemployment? Urged caution based on the many unknowns that remain with the virus? Noted rising tensions with China? Nope. They told clients to buy the f*cking dip, which is especially hilarious since the S&P is nearly flat for the year and the NASDAQ is at all time highs. There is no dip.
But that didn’t stop Citi from recommending clients buy. Ballin said: “There are plenty of things to buy. The more study that we did for the report, the more excited we got. The data is compelling.”
This, of course, famously contradicts Warren Buffett, who came out with the market about 10% lower from current levels and said that there was nothing to buy and that the Fed acted too quickly.
The report predicts a “brief, extremely deep, rolling global recession” and then a “sharp snapback in global economic activity and a partial, uneven recovery.” They cite record low interest rates as a catalyst for stocks and say fixed income is “no longer a natural hedge” for equities. Citi estimates a 10 year annual return for global small and mid-cap equities of 11.6%.
Per Bloomberg, here are four other key points in Citi’s note:
- Some of the best returns for private equity, real estate and hedge fund managers have come after crisis periods. “In 2001 and 2008, for example, average private equity vintage returns increased by 800 and 710 basis points, respectively, over the prior year’s level,” according to the report. The private bank expects that “the best distressed opportunities will become available later this year and during 2021.”
- Sustainable dividends remain attractive, particularly tech companies that “have been less impacted by the economic effects of social distancing.” Some health-care stocks could also benefit as cash flow that once went to fund share buybacks and M&A activity could be reduced to support dividend payouts.
- Some private bank clients hold as much as 35% of their core portfolio in cash. Fixed-income assets that top the negligible return of cash include U.S. investment grade corporate bonds maturing in three to five years. Those bonds yield almost 2%, or 50 basis points above similar debt maturing in one to three years.
- Areas where Citigroup continues to see “unstoppable trends” are global health care, because of greater longevity; digital disruption (including digital media content, e-commerce and cybersecurity providers) and the rise of Asia.
This outlook from Citi shows we have officially reached peak lopsidedness, where saving cash is now treated and looked upon as though it is accruing debt. You can’t save it, you’re not allow to just hold it and the more of it you accrue, the worse off you are.
And if you think banks are in a rush to get cash out the door now, wait until they find out that fiat isn’t really even money…
via ZeroHedge News https://ift.tt/2Ym4CF5 Tyler Durden