Market Outcome Stats Remain Bullish: Citi

With resilient earnings and upbeat earnings guidance, the S&P 500 (INDEXSP:.INX) may still be slightly undervalued, even with rising investor sentiment, according to a note from Citi’s chief U.S. equity strategist Tobias Levkovich.

Levkovich, joined by Lorraine Schmitt and Christina Wood, looked at the earnings yield gaps for both Treasury futures and Moody’s Baa corporate bonds, and found that they showed slight devaluation. “At one-to-two standard deviations below its 40-year weekly average, the market outcome statistics remain bullish over the next 12 months,” Levkovich wrote. His analysis showed a 90 percent chance that the S&P 500 (INDEXSP:.INX) would gain in the next 12 months, and 70 percent that it would gain over the next six months.

Undervaluation may be...

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