Citi is making changes to its quantatative North American Focus List.
From an overhead market view its base case is for S&P (SP500) (NYSEARCA:SPY) 4,700 predicated on a soft economic landing, "whereas our mild recession scenario implies downside to 3650 (roughly 18x P/E on $203 2023 EPS)."
"From the quantitative perspective, given the heightened macro risk, we think the environment is more conducive to factors like Price Momentum and Earnings Revision where they carry much less macro exposures currently," U.S. equity strategist Scott Chronert wrote in a note.
"Factors such as Low Risk and Quality may perform well in a recessionary environment. As the table below shows, the majority of these stocks have attractive momentum characteristics with bias towards higher quality and lower risk."
The following stocks by sector are in the North American Focus List. Listed is expected total return and crowding score, where a lower score indicates a more-out-of-consensus stock.
The new arrivals are Buy-rated AutoZone (AZO) and Thermo Fisher (TMO) and Sell-rated Ionis (IONS). Buy-rate Avery Dennison (AVY), Dover (DOV), Ryman Hospitality Properties (RHP) and United Airlines (UAL) leave the list.
Basic Materials (XLB)
- Linde (LIN), ETR 35%, crowding score 85%
- PG&E (PCG), 43%, N/A
- M&T Bank (MTB), 35%, 87%
Real Estate (XLRE)
- Kimco Realty (KIM), 73%, 73%
Info Tech (XLK)
Communication Services (XLC)
Here is where a 70s-style recession would push the S&P.