{"id":18798,"date":"2023-06-06T06:42:43","date_gmt":"2023-06-06T10:42:43","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/heres-the-pain-trade-citi-sees-in-u-s-stocks-as-sp-500-exceeds-its-2023-target\/"},"modified":"2023-06-06T06:42:44","modified_gmt":"2023-06-06T10:42:44","slug":"heres-the-pain-trade-citi-sees-in-u-s-stocks-as-sp-500-exceeds-its-2023-target","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=18798","title":{"rendered":"Here\u2019s the pain trade Citi sees in U.S. stocks as S&P 500 exceeds its 2023 target"},"content":{"rendered":"
\n

The artificial-intelligence craze hasn\u2019t moved Citigroup\u2019s year-end target for the S&P 500, but the bank\u2019s equity analysts are keeping an eye out for what they\u2019ve labeled the \u201cp-AI-n trade.\u201d<\/p>\n

That would be the pain trade inflicted by AI enthusiasm or a potential pause or pivot in the Federal Reserve\u2019s interest-rate hiking cycle, according to a Citi Research note dated June 2. Citi analysts, led by managing director Scott Chronert, currently have a year-end target of 4,000 for the S&P 500.<\/p>\n

\n

\u201cA combination of artificial intelligence expectations and eventual end to Fed rate hikes have us looking over our shoulder for upside risk related to a flow shift and sentiment change in favor of equities,\u201d the analysts said in the note. The S&P 500
\n SPX,
\n -0.20%<\/bg-quote>
\n closed Monday at 4,273.79, up 11.3% so far in 2023.<\/p>\n

Still, Citi analysts are \u201cfundamentally confident\u201d in their year-end forecast for the S&P 500 along with an expected trading range around it of 3,800-4,200, according to the note. Megacap growth and technology stocks are driving the index\u2019s gains this year, but recession worries remain, they said.<\/p>\n

\u201cThe recent market action continues to tell us that, under the index surface, ongoing recession risk is being priced in,\u201d the analysts wrote.<\/p>\n

\u201cHow does one get the conviction to make a longer-term investment call related to generative AI impacts when expectations for an intermediate-term recession scenario remain front and center,\u201d they said in the note. \u201cThis, of course, defines the current \u2018p-AI-n\u2019 trade.\u201d<\/p>\n

In their view, an S&P 500 target of 4,000 represents \u201cfair value\u201d based on an expectation for \u201ca mild recession.\u201d That price level aligns with a 18-19x multiple on earnings per share of $213 for the index, according to the note.<\/p>\n

Meanwhile, the trading range that the Citi analysts expect to see around their year-end target is \u201cnow being tested to the upside.\u201d\u00a0\u00a0<\/p>\n

\u201cWe are increasingly asked for any insight on quantifying artificial intelligence impacts,\u201d the Citi analysts said. \u201cThat seems premature, meaning we\u2019re left with anecdotal evidence.\u201d<\/p>\n

Chip maker Nvidia Corp.\u2019s
\n NVDA,
\n -0.40%<\/bg-quote>
\n recent guidance around AI \u201cpulled forward many investors\u2019 expectations for timing of the theme\u2019s influences,\u201d according to the Citi note.<\/p>\n

\u201cOur best guess as to how artificial intelligence and generative AI evolves from here is that it will gradually go from a unique, differentiated, and novel theme to another basic building block of our everyday lives and corporate processes,\u201d the analysts wrote. \u201cThere is a subtle longer-term valuation tailwind likely to result from this.\u201d<\/p>\n

Read<\/strong>: AI buzz pushes tech stocks higher \u2014 but here\u2019s why the ripple effect may be limited<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The artificial-intelligence craze hasn\u2019t moved Citigroup\u2019s year-end target for the S&P 500, but the bank\u2019s equity analysts are keeping an eye out for what they\u2019ve labeled the \u201cp-AI-n trade.\u201d That would be the pain trade inflicted by AI enthusiasm or a potential pause or pivot in the Federal Reserve\u2019s interest-rate hiking cycle, according to a […]<\/p>\n","protected":false},"author":1,"featured_media":18799,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-18798","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nHere\u2019s the pain trade Citi sees in U.S. stocks as S&P 500 exceeds its 2023 target | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The artificial-intelligence craze hasn\u2019t moved 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