Stock-market investors entered panic mode after the wild ride to end 2018, meaning it might be a good time to buy equities, according to Tobias Levkovich, chief U.S. equity strategist at Citigroup.
Citigroup’s Panic/Euphoria model hit panic levels after a massive drop in stock prices last month, Levkovich said. This indicates “high probabilities of making money (with average 18% upward moves looking out 12 months),” Levkovich said in a note to clients on Monday.
Citigroup Panic/Euphoria Model
Source: Citigroup
The model — which takes into account factors such as newsletter sentiment, margin debt and options activity — has had a good track record of predicting pullbacks and surges. It reached “euphoria” levels in 1999 before the dotcom bubble burst in 2000. It also broke into “panic” levels back in 2016 before the big post-election rally. The model also hit euphoria levels to end 2017.
The S&P 500 posted its biggest one-year decline since 2008 last year, sliding 6.2 percent. The broad index also notched its worst monthly performance since February 2009 as well as its biggest December fall since 1931.
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