Citi Strategists Say Buy the Dip With Few Signs of Bear Market


(Bloomberg) — A Citigroup Inc. indicator is signaling it’s time to get back into stocks as the Ukraine-fueled selloff won’t turn into a bear market.

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Out of 18 potential red flags in Citi’s global Bear Market checklist, only seven are currently waving, far fewer than before bear markets of 2000 and 2007, strategists led by Beata Manthey wrote in a note. In Europe, the number of danger signs is only five, they said.

The checklist, which takes into account factors such as equity risk premium, fund flows and capital expenditure growth, would need to show red flags into double digits to signal a more serious drop, the strategists said.

“History suggests that equity markets should recover,” strategists including Beata Manthey write in a note. Citi’s checklist “wants to buy this dip.”

European stocks are recovering on Friday after entering a technical correction the day before as President Vladimir Putin’s decision to invade Ukraine triggered the worst security crisis in Europe since World War II.

Citi’s call contrasts with Goldman Sachs Group Inc. strategists, who said the impact of the unfolding crisis in Ukraine will weigh on European stocks for months and lowered their targets for the continent’s benchmarks.

Goldman Cuts European Stock Targets, Says Russia Risk Will Stay

Manthey and her colleagues see European banks as “a sector to buy into this dip,” due to cheap valuations and the prospect of high interest rates.

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