Citi tells rich clients to stop being so nervous about stocks

Citi tells rich clients to stop being so nervous about stocks
A new report from the private bank rejects the idea that a recession is imminent.
DEC 06, 2019
By  Bloomberg
Citigroup's private bank wants its clients to work on an attitude adjustment. Next year will be "brighter than many expect," Citi Private Bank said in its 2020 outlook — "Staying Positive in a Negative (Yielding) World" — published Thursday. It rejects the idea that a recession is imminent. "The point of view of many family clients I meet is one of a world full of angst due to politics and trade," David Bailin, the private bank's chief investment officer, said in an interview. That uneasy feeling "is pervasive, yet when you look at the economy you see facts that are completely different than that." Mr. Bailin said he hopes the report will help clients stay fully invested and avoid "the fear and paralysis" that led many to miss this year's market rebound. A November survey by UBS Global Wealth Management found that among more than 3,400 global respondents, each of whom had more than $1 million in investable assets, cash made up 25% of portfolios, on average.

'Staying strong'

Strong consumer spending and a high U.S. savings rate feed into Mr. Bailin's argument for a rosier outlook. "Manufacturers both for consumer goods and industrial goods were expecting a downturn that never happened," he said. "Between the consumer staying strong and the Federal Reserve and other central banks being accommodative, there was success in extending an already-long expansion." The bank predicts the expansion will continue, anticipating global corporate earnings to rise 7% or more from current levels, barring an escalation of trade disputes. Citi also forecasts equity returns in the U.S. and abroad of about 7% in 2020. [Recommended video: Bringing financial literacy to teenage girls through Rock the Street, Wall Street] The bond market is one area where Citi has a negative outlook. "In the U.S., we take positive yield for granted, but at one moment this year there was around $18 trillion in negative-yielding global debt," Mr. Bailin said. He sees no reason for clients to own bonds when the only upside is capital appreciation. Citi suggests switching out some bond holdings for certain equities with histories of earnings and dividend growth. Some of Citi's private clients are already making outright bets on improvements in the markets, said Mr. Bailin. "Our Asian clients have been buying Asian equities, which in my mind is anticipatory of a trade deal," he said. Citi's report also suggests investors look well beyond 2020 to what it calls "unstoppable trends" that will unfold regardless of the economy. Those include opportunities in leading companies that help protect against cybersecurity threats, have innovative financial technologies and that are part of the transition to renewable energy.

Latest News

Trio of advisors switch for 'Happier' times at LPL Financial
Trio of advisors switch for 'Happier' times at LPL Financial

Former Northwestern Mutual advisors join firm for independence.

Indie $8B RIA adds further leadership talent amid growth drive
Indie $8B RIA adds further leadership talent amid growth drive

Executives from LPL Financial, Cresset Partners hired for key roles.

Stock volatility remained low despite risk events
Stock volatility remained low despite risk events

Geopolitical tension has been managed well by the markets.

Fed minutes to provide signals on rate cuts
Fed minutes to provide signals on rate cuts

December cut is still a possiblity.

Trump's tariff talk roils markets, political leaders
Trump's tariff talk roils markets, political leaders

Canada, China among nations to react to president-elect's comments.

SPONSORED The future of prospecting: Say goodbye to cold calls and hello to smart connections

Streamline your outreach with Aidentified's AI-driven solutions

SPONSORED A bumpy start to autumn but more positives ahead

This season’s market volatility: Positioning for rate relief, income growth and the AI rebound