Citi predicts return on shares of 14% in 2019, advise "buy the dip"

The fear of a recession is already too dramatic, and by 2019 we only expect the real economic slowdown to occur to a minimum. The first signs will come from the weakening of corporate profits, according to Citigroup INC, advising investors to buy the shares in the stock.

Strategists, including Robert Buckland and Jonatha Stubbs, forecast a 14% return on world stocks in the next 12 months, with their "Red Bull Market Flag List" reporting only 3.5 redpoints of the possible 18 items on the list.

"Market shares are far from overvalued, cash flows are at their lowest levels and companies' investment habits are gone." - says Buckland, adding that "aligning the yield curve and rising credit markets is worrying, but traditional bear market signals are not yet so obvious."

Citi expects global EPS to average to 4% in 2019. Though this figure is below the projected 7%, it is much better than the 4% contraction currently estimated by the markets.

For Europe, strategists have lowered their expectations for the development of British stocks to "neutral," as Brexit's uncertainty continues to overwhelm confidence, although there is no expectation of "no deal", according to Buckland, a number of negative news are already appreciated by the market .

According to Stubbs, EPS expectations for other European stocks are shrinking because Europe is highly sensitive to changes in world trade that are currently negative due to the trade war. Citi predicts the Stoxx Europe 600 to reach around 400 by the end of the year, up 18 percent from today's levels.

Strategies recommend emerging market shares, given the possibility of weakening the US dollar this year.

Citi recommends a balanced approach to sectors in building exposure with a good mix of cyclical and defensive shares. The Bank recommends the telecommunication and health sector in the defensive aspect and in the cyclical - industrial sector. The Bank defines as "neutral" the energy sector, the financial sector, the raw materials sector and information technology. The utility sector and consumer-oriented companies remain underestimated.

Source: Bloomberg Finance L.P.

Graphs: Used with permission of Bloomberg Finance L.P.

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