Citi warns of bigger market corrections ahead — but says ‘buy on the dips’

Stock markets have had a bumpy first quarter, and global equity analysts at Citigroup believe that this is only set to continue.

Fears of a sudden uptick in inflation, a potential trade war and possible new regulations on the tech sector have sent stock prices lower since the start of 2018. Analysts at Citi said Monday that it's likely that there will be bigger sell-offs ahead — but believes they would opportunities to pick up some bargains.

"Our Global Equity Quarterly recommends buying equities on the bigger dips," the bank said in a note Monday. "Our latest round of forecasts imply a rise in global equity markets of about 8 percent to the end of the year, led by Europe with about 13 percent," the bank added.

The forecasts are based on expectations of higher economic growth across the world and increased room for investments from several companies due to tax cuts in the U.S. However, the bank warned that risks are rising due to increased market volatility and higher interest rates — these could lower the margins that companies make by increasing their debt repayments and thus send stocks lower. A slowdown in global growth was also mentioned as a risk to Citi's outlook.

Nonetheless, the analysts still see upside for equity markets as these haven't yet reached a bear market — the moment when share prices move lower and are projected to continue falling.

Source: CNBC

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