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Here’s How to Earn Ahead of the Bear Market – Citigroup

According to a Street analyst, investors have limited opportunity to earn before a “full-on bear” arrives in the global markets.

HQBroker - Third of Four Phases Market Ahead of Bubble

Citigroup said that they are currently in the third phase of four periods which are of market cycles standards. Growth and momentum trades are accompanied in this late cycle. In fact, this late cycle has created bubbles in the past.

READ ALSO: Bull and Bear Markets: Breaking Down the Differences

Third of Four Phases: Market Ahead of Bubble

Headed by Robert Buckland, an equity strategist team wrote, “Stock market bubbles burst. Dips should be sold not bought. More defensive and contrarian strategies deliver.”

It is advisable for investors to go for these certain items in preparation for a bear market and US Recession. These items include Overweight on Materials, IT and Health Care, and underweight on Consumer Discretionary, Utilities and Consumer Staples. The recommendation of the investment bank comprises of regional abandonment of markets specifically in Japan and Australia. Then, one can proceed to go overweight on US equities and market equities in Korea, Taiwan, Russia, and Brazil. Generally, investors are advised to go doubling down on stocks on procyclical and growth.

SEE FURTHER: Primary Market and Secondary Market: Knowing their Differences

HQBroker - On one hand, here are what to buy ahead of the bear market.jpg

On one hand, here are what to buy ahead of the bear market

  • Overweight
  • Materials
  • Technology
  • Health Care

SEE ALSO: Types of Stocks in the Market (part 1)

HQBroker - On the other hand, here are what to sell ahead of the bear market

On the other hand, here are what to sell ahead of the bear market

  • Underweight
  • Consumer Discretionary
  • Utilities
  • Consumer Staples

SEE ALSO: Types of Stocks in the Market (part 2)

According to Citigroup, a flat of downward sloping U.S. curve had served good predictions about the former recessions. Moreover, it has been generating good forecast on both EPS collapse and global equity bear market. “A flat curve indicates that Fed policy is tight and likely to drive a slowdown in the economy,” Citigroup added. Another recommendation of the Citigroup includes thorough monitoring of the US yield curve and IG credit spreads.

Meanwhile, Bank of America Merrill Lynch analyst showed that 14 out of 19 indicators that they use to monitor a bear market have been prompted as of this moment. The latest signals of the upcoming bear market were the outperformance of more expensive, large, low dividend yield and low-quality stocks over high-quality stocks, with stronger profits.

BofA made an estimation about the third phase that started in February this year and prediction on S&P 500. The forecast shows a 3000 reach at the end of the year that replicates an advantage of 7.3% last Monday.

However, Guggenheim Partners’ Scott Minerd said that not everyone sees much time to buy stocks. He recommended investors to sell now, putting emphasis on the potential benefit from a global trade war.

“Investors are just ignoring the consequences and what’s going to have to be done in terms of Federal Reserve policy to offset the inflationary pressure that’s going to come out of tariffs,” said Guggenheim Partners’ Global Chief Investment Officer Scott Minerd in an interview with CNBC.

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