'All bear markets include false rallies': Citi warns stocks have further to fall during the coronavirus pandemic

ReutersWorkers are seen at Citibank offices in the Canary Wharf financial district in London
  • The stock market will likely find a new bottom in the coming months, analysts at Citi warned.
  • Citi’s team, led by Robert Buckland, said: “All bear markets include false rallies, often associated with supportive monetary policy.”
  • Goldman Sachs’ top strategist Peter Oppenheimer also warned last week that equities have rallied too quickly and predicted a fresh plunge.
  • Visit Business Insider’s homepage for more stories.

Markets have faced a rollercoaster of highs and lows in the past few weeks, but analysts at Citi think markets have yet to find their true bottom.

“All bear markets include false rallies, often associated with supportive monetary policy,” a Citi team led by Robert Buckland said in a client note, as reported by MarketWatch.

The S&P 500 has rallied roughly 25% from its lowest level in 2020 in recent weeks, but Citi bank thinks the danger is far from over.

“Markets only find a sustainable base when there are signs that cheap money is feeding through into the real economy, rather than temporarily supporting asset prices,” the team added.

It could be a while before that happens, the team said.

Goldman Sachs’ top strategist Peter Oppenheimer also warned last week that equities have rallied too quickly and predicted a fresh plunge.

Citi’s comments come just days after the earnings season has kicked off with some major US banks having posted results.

Citi, JPMorgan, Bank of America and Morgan Stanley are just few of the big players who have recently reported their first quarter earnings reports.

Citi posted lower than expected earnings last week showing a 46% drop in net income compared to the previous quarter.

Key economic data is due to be released on Thursday. US weekly jobless claims, as well as IHS Markit PMI data, will come out Thursday morning.

While Citi thinks there’s more market pain to come, when stocks eventually find a bottom, the bank is expecting a V-shaped market rally after markets do recover and is advising investors to buy the dip.

But not everybody is convinced that the US will recover rapidly from the economic fallout of coronavirus

This contrasts from emerging markets investor Mark Mobius’ view who warned on Tuesday the US faces a “double dip recession” with two dips and two periods of recovery.

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