Citi Boosts S&P 500 Target, Says Federal Reserve Will Do ‘Whatever It Takes’ To Prevent Another Market Crash

TOPLINE

Citigroup, which held one of the most bearish outlooks for stocks among Wall Street firms, has raised its year-end price target for the S&P 500 to a modest loss from current levels thanks to “unbridled” support from the Federal Reserve, which the bank says will do “whatever it takes” to prevent another market crash.

KEY FACTS

Crucial quote

“We still think the market may be ahead of itself but the Fed will do ‘whatever it takes’ to prevent U.S. stocks declining by teen-like percentages,” Levkovich wrote. “Is the S&P 500 ready to drop 500 points? No.”

Tangent

Citi’s upgraded year-end S&P 500 price target of 3,300 still points to the downside, however, after the benchmark index closed at 3,433 on Tuesday, implying a decline of 3.9%. The new forecast is still far improved from the prior estimate, which called for a 15.5% drop in the S&P 500 from current levels. Looking ahead, Citi analysts see the S&P 500 reaching 3,600 by mid-2021, around a 5% gain from its current level. 

What to watch for

Citi recommends that investors approach the market with a “combination of some risk and also defensiveness,” while also expressing skepticism about whether Big Tech stocks will continue to lead the current rally. “For some reason, we keep getting visions of Icarus getting too close to the sun and thus while we have lifted objectives to reflect these realities and the potential for even more upside, we think that ignoring some of our other indicators is not sound,” Levkovich said.

Key background

Other major firms on Wall Street have also upped their forecasts for the S&P 500 in recent months, including Goldman Sachs and RC Capital Markets, as strategists try to catch up to the market rally. The S&P 500 closed at a new record high last week, fully erasing its losses from the coronavirus pandemic. The S&P 500 has continued to set new highs this week, as stocks have enjoyed a momentous run. Earlier this year, the index tumbled more than 30% from its peak in February as the pandemic caused a market crash and sent the economy into a recession.

Further reading

Apple Stock Could Surge Even Higher Following $2 Trillion Valuation, Morgan Stanley Says (Forbes)

Economists Warn U.S. GDP Won’t Recover To Pre-Pandemic Levels Until 2022 (Forbes)

Stocks Turn Negative After Federal Reserve Says U.S. Economy Still ‘Well Below’ Pre-Pandemic Levels (Forbes)

S&P 500 Closes At New Record High, Fully Recovering Losses From Coronavirus Pandemic (Forbes)

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