Tags: Levkovich | cautious | stock | market

Citigroup’s Levkovich Turns Cautious on ‘Accident Prone’ Stock Market

By    |   Thursday, 19 April 2012 09:29 AM

Tobias Levkovich, Citigroup’s chief U.S. equity strategist, took a bullish view on the stock market in early October as it began an impressive 29 percent rally to current levels.

But now he feels differently. "I’m a little bit more cautious — not because markets are up, but because our sentiment model is showing complacency,” he tells CNBC.

Valuations aren’t as attractive. And Levkovich is concerned about expectations that earnings growth will jump from the low single-digits in the first quarter to 16 percent in the fourth quarter. “That seems pretty aggressive, very hockey-stick-like,” he says. “I’m not sure what that impetus will be in the second half of the year to really crank up the [profit] numbers that way.”

Editor's Note:
Obama’s Last-Ditch Effort to ‘Fix’ America Will Cause the Unthinkable

So earnings forecasts are likely to slide through the summer, Levkovich says.

Europe is an issue too. While investors are now focusing on Spain, “I’d actually be a little more worried about France when the leading presidential contender [Francois Hollande] talks about not letting financial markets dictate French economic policy,” Levkovich says.

Put this all together, and the U.S. stock market is “somewhat accident-prone" now, Levkovich says.

Others see difficulties for the market too.

“The fears of the investor still are more overwhelming than the hope for a better future,” BlackRock CEO Laurence Fink said in an earnings conference call. “Despite the rally in global equities from their lows, I would still qualify the market to be quite fragile.”

Editor's Note: Obama’s Last-Ditch Effort to ‘Fix’ America Will Cause the Unthinkable

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