Citi tells rich clients: stop being so nervous about stocks

New York

CITIGROUP Inc's private bank wants its clients to work on an attitude adjustment.

Next year will be "brighter than many expect", Citi Private Bank said in its 2020 outlook - Staying Positive in a Negative (Yielding) World - published on Thursday. It rejects the idea that a recession is imminent.

"The point of view of many family clients I meet is one of a world full of angst due to politics and trade," David Bailin, the private bank's chief investment officer, said in an interview.

That uneasy feeling "is pervasive, yet when you look at the economy you see facts that are completely different than that".

Mr Bailin said he hopes the report will help clients stay fully invested and avoid "the fear and paralysis" that led many to miss this year's market rebound.

Strong consumer spending and a high US savings rate feed into Mr Bailin's argument for a rosier outlook.

"Manufacturers both for consumer goods and industrial goods were expecting a downturn that never happened," he said.

"Between the consumer staying strong and the Federal Reserve and other central banks being accommodative, there was success in extending an already-long expansion."

The bank predicts the expansion will continue, anticipating global corporate earnings to rise 7 per cent or more from current levels, barring an escalation of trade disputes. Citi also forecasts equity returns in the US and abroad of about 7 per cent in 2020.

The bond market is one area where Citi has a negative outlook.

"In the US, we take positive yield for granted, but at one moment this year there was around US$18 trillion in negative-yielding global debt," Mr Bailin said. He sees no reason for clients to own bonds when the only upside is capital appreciation.

Citi suggests switching out some bond holdings for certain equities with histories of earnings and dividend growth.

Some of Citi's private clients are already making outright bets on improvements in the markets, said Mr Bailin. "Our Asian clients have been buying Asian equities, which in my mind is anticipatory of a trade deal," he said. BLOOMBERG