US investment bank Citi on Thursday cut its projections for global equity returns by mid-2019 and also downgraded its position on emerging market stocks to neutral from overweight, citing trade war risks and dollar strength. The bank said its analysts now expect world stocks to rise just 3 percent from current levels over the next 12 months while predicting emerging equities will drop 6 percent.
Citi analysts told clients upward progress could be harder to sustain from here and while emerging markets were decently valued, "potential trade wars and ongoing dollar strength will prove an ongoing drag for the asset class." However, they said they remained overweight US stocks and bullish on European equities. "Although we are turning more cautious, we think it is too early to call the end of this nine-year global bull market," they added.
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