Citi reiterates underweight stance on global equities

Analysts at Citi reiterated their cautious view on global equities, pointing out the recent so-called 'bull flattening' seen in the US government interest rate curve.

"We are still concerned about global growth risks, the developed market valuation backdrop but also waning policy efficacy," analysts Jeremy Hale, Graham S Bishop, Maximilian Moldaschl, Amir Amin and Jamie Fahy said in a research note sent to clients.

The analysts also 'neutralised' their stance on emerging market stocks despite the attractive valuation on offer, given the fading impact of China´s economic stimulus and the more 'hawkish' US central bank.

"The key lies in the type of flattening we have seen in this cycle – lower term rates/bull flattening reflect the weak global backdrop and this maybe doesn’t represent a very positive equity market environmentl," they said.

Citi reiterated its 'underweight' recommendation on global equities, increased its 'overweight' position in credit and said it was 'overweight' sovereign bonds.

Nonetheless, regarding stocks Citi said: "We see this bull market as tired and old, but not finished. Our index
target implies upside from current levels."