LONDON: Citi analysts sharply raised their earnings per share (EPS) forecasts for world stocks on a top-down basis, saying their first response right after the COVID-19 was “too bearish”.
The bank now expects global EPS to contract 30% in 2020, a marked improvement from a 50% drop it had expected at the height of the coronavirus crisis.
The estimate is a stark contrast to bottom-up analyst consensus of 18% contraction in 2020, which Citi said “looks too optimistic”.
The U.S. bank sees MSCI all-country world stocks index to hit 705 by mid-2021, up 4% from current levels.
World stocks hit record high last week as unprecedented stimulus – $20 trillion and counting – is forcing a structural change in how financial assets are valued.
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Citi said stocks look “expensive, but not ridiculously so”, adding that central bank actions can sustain higher valuations across all equity markets.
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