Stock Market Is Euphoric While Equity Fund Flows Dip

The stock market continues to be in a state of euphoria, according to Citi’s chief US equity strategist Tobias Levkovich, and there is still a fair chance of a year-end correction. While Levkovich is bullish on equities in the long term, he warns that investors need to use “tactical caution” in the near term.

“Our Panic/Euphoria remained in Euphoria territory, while our proprietary Cyclical Expectations Model turned higher,” he writes. “We continue to think that a very late 2013 correction (in the 5%-7% range) is possible for equities (or it could slip into 1Q14) given weakening EPS forward guidance trends, a rolling over of the Citi Economic Surprise Indices in Europe, the US and G10- economies...