US Stocks Braced for Potential 10% Slide: Citi's Warning

Citigroup Inc. strategists have raised concerns about the current positioning in S&P 500 futures, suggesting that the market could be in store for a 10% slide. The team, led by Chris Montagu, has identified several indicators that point to an "extended" market, with long positions on futures linked to the benchmark index reaching their highest levels since mid-2023.


Citi's risk assessment differs from its evaluation during the 2022 market downturn. In 2022, investors focused on loss avoidance, missing out on the sharp recovery in core portfolio assets that followed a rare joint decline in fixed income and equities. This time, investors are more optimistic about the macro outlook, with the Fed having already started cutting rates at a time when economic growth remains resilient.

The key factors driving Citi's prediction of a potential 10% slide in the S&P 500 include the high levels of long positions on futures, the optimism surrounding the macro outlook, and the potential for markets to become increasingly captivated by unpredictable US election results. These factors, combined with the possibility of further supply shocks or deeper weakening in China, could contribute to a market correction.


Citi's outlook for the US stock market aligns with other major financial institutions and industry experts, who have also expressed concerns about the current market conditions. Many investors are optimistic about the macro outlook, but the potential for a market correction remains a risk.

In conclusion, Citi strategists have warned that US stocks could be in store for a 10% slide, citing extended positioning in S&P 500 futures and other factors. While investors remain optimistic about the macro outlook, the potential for a market correction should not be overlooked. As the market navigates through uncertainty, investors should remain vigilant and consider diversifying their portfolios to mitigate risks.