These 2 key triggers could lead to the next wave of market turmoil and Citi says to buy the decline

Stock index valuations are at high levels, potential credit downgrades are looming and there is the possibility of inflationary surprises this year, Citi said, underpinning the strategists’ projections.

Financial assessments are inconsistent with actual measures such as gross domestic product “by virtually all parameters,” according to the bank. This charges the gun for a turbulence trigger.

It could be inflation. The COVID-19 pandemic laid the groundwork for inflation rate volatility in 2021. While Citi said there was “little underlying support” for sustained inflation, missing prices due to the effect of lockdowns and the corresponding year-on-year base effects could scare the markets.

A wave of turbulence could also be triggered by the slowdown in central bank purchases. Projections suggest that the pace of net asset purchases and purchases will slow this year. Since net asset purchases are the main path between monetary policy and the real economy, Citi said that a change in these models could surprise markets “no matter how hard central banks try to communicate to the advanced”.

Any turbulence is likely to hit the equity and credit markets, according to the investment bank, as these asset classes currently exhibit higher volatility than recent standards.

So what should investors do? Citi recommends buying the next dip.

The investment banking global bear market checklist records 8/18 red flags after the latest rally, which is the biggest since 2009. The US market has 9.5 red flags while it is lower in Europe, with 5.

This indicates a fair amount of “foam” in the markets – the more sparkling the Citi model, the less inclined to buy the dip. But that’s still enough.

The buzz

Biden got to work on Wednesday to reverse some of former President Donald Trump’s signing policies. He signed 15 decrees, which include the repeal of the ban on immigration from majority Muslim countries, the revocation of the permit for the Keystone XL pipeline and the start of the process of rallying the Paris agreement on the weather.

Attention now turns to introducing a $ 1.9 trillion plan through Congress to help the pandemic-ravaged economy, including sending 1,400 stimulus checks to Americans.

Amazon AMZN Online Retailer,
+ 2.37%
offered to support the new government’s pledge to increase the distribution of COVID-19 vaccines across the United States, saying this could help Biden meet his goal of vaccinating 100 million Americans in the next 100 days.

Economically, all eyes are on the jobs reports released today. Initial jobless claims as of Jan. 14 stood at 900,000, below the expected 935,000 and down from last week’s surprise of 965,000. There were around 5 million pending unemployment claims as of January 9.

The number of housing starts in December stood at 1.7 million, above expectations.

Three Chinese telecommunications giants: China Telecom 728,
-1.72%,
China Mobile 941,
-0.10%,
and China Unicom 762,
-1.81%
– asked the New York Stock Exchange to reconsider its decision to delist them in accordance with a policy of the Trump era.

The consumer products giant Unilever ULVR,

said that by 2030, it will ensure that all workers in its vast supply chain receive a living wage from their employers. The multinational is at the origin of brands such as Ben & Jerry’s, Hellmann’s, Q-Tips and Dove soap.

The steps

It’s a good start for the day after yesterday’s big rally. Stock markets in the United States are higher, with the Nasdaq COMP,
+ 0.59%
in front of the Dow DJIA,
+ 0.12%
and S&P 500 SPX,
+ 0.20%.
Asian markets NIK,
+ 0.82%

HSI,
-0.12%

SHCOMP,
+ 1.07%
widely rallied while the European UKX markets,
-0.27%

DAX,
-0.05%

PX1,
-0.57%
continued their advance. The pan-European Stoxx 600 SXXP,
+ 0.09%
is up eight of the past 11 days.

Table

Trump’s days in the White House are a thing of the past, with the stock market performance he now chaired for the books. Our Deutsche Bank DBK chart of the day,
-0.66%
shows Trump led the United States through the S&P 500’s second-best performance since the Great Depression, in annualized terms. Bill Clinton, president through the dot-com bubble in the late 1990s, takes the top spot.

Random readings

Hell Paying: Alleged arson shakes Church of Satan community.

A woman declared dead in 2017 is fighting to be declared alive.

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