Banking giant Citi believes equities could witness more downside price action, even though the S&P 500 is already down over 7% so far this year.
In a new CNBC interview, Scott Chronert, Citi’s US equity strategist, says the equity correction lacks key signals that typically mark a bottom.
According to Chronert, investors appear to be buying and selling based on the latest developments around oil and hostilities in the Middle East.
“You haven’t had that classic, classic flush where you see a major spike in volatility. You see a lot of volume that kind of points to hedging activity. This has been more taken a day at a time as the news flow unfolds. And so I think it’s sort of a tricky place to say we’ve found a bottom.”
Markets tend to bottom after a severe sell-off in a short-term period of time, accompanied by heavy volume.
Chronert says the S&P 500 is inching closer to correction territory at 10%, but believes it could take more time before the market bottoms out.
“I would say, generally speaking, when we talk about corrective phases, down 5% to 10% is a pretty good benchmark… So I’d say short term, yeah, we’re probably OK. But headlines can change tomorrow. When I come back on this, I think we probably need another month or so to get more conviction that we’re actually putting a more durable low into place.”
As of Friday’s close, the S&P 500 is trading at 6,368.
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