U.S. Stocks 'Overvalued,' Emerging Markets and Resources Promising as Dollar Expected to Fall - Citi


(Bloomberg): Strategists at Citigroup Inc. recommended reducing fund allocations to "overvalued" U.S. stocks to a "neutral" level. They said they expect relatively higher returns from emerging-market and U.K. stocks this year as global stock gains are limited.

Robert Buckland and other strategists raised their judgment on emerging market stocks to "overweight" in a report on June 6. They expect global stocks to rise only 2 percent this year. They believe that the ongoing expansion of U.S. fiscal spending will continue to push the dollar lower and provide a tailwind for emerging market and resource stocks. He sees the U.K., Australia and emerging market stocks as promising.

We also expect U.S. Treasury yields to continue to rise, prompting further rotation into value stocks.

Our slightly optimistic view on global equities will be overly optimistic if the new coronavirus vaccine does not bring about a global economic recovery, and under-optimistic if ultra-low interest rates lead to large inflows into equity funds," he added.