Citi strategists said Monday the investment giant maintains its constructive outlook on US equities, however, this year’s rally has already lifted the S&P 500 above its year-end base price target of 5,100.
“Our bull case 5700 target is getting increased attention. For now, our messaging is to expect a nearer term overshoot in the context of a buy pullbacks approach, focus on our broadening theme, and related stock selection opportunities,” the strategists wrote in the note.
Citi also reiterated its earnings forecast of $245 for the index but said there is no clear path to reaching $260 yet.
The index is currently trading at around 23 times trailing earnings and 21 times forward earnings. To maintain these valuation levels, it's essential for 10-year yields to remain stable or decrease, the strategists explained.
Sector-wise, Citi highlighted the Cyclicals sector over Defensives in terms of strategic positioning.
“Moving into ‘24, a recovery in Cyclicals earnings aligns with new structural tailwinds in the Growth cluster,” its note states.