The Other Side of Life 24/7: Citi's 'Panic-Euphoria Model' Screams BUY, And There's A 97% Chance Of A Double-Digit Return

Wednesday, October 5, 2011

Citi's 'Panic-Euphoria Model' Screams BUY, And There's A 97% Chance Of A Double-Digit Return

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Wednesday, October 5, 2011

Citi's 'Panic-Euphoria Model' Screams BUY, And There's A 97% Chance Of A Double-Digit Return

The S&P 500 is down 17% since its April 29 high. Yesterday, the markets briefly dipped into bear market territory. Fears of a global recession have kept stock market volatility elevated.

But, Citigroup strategist Tobias Levkovich argues that the all out panic actually presents a great buying opportunity for investors. He notes:

The proprietary Panic/Euphoria Model has been in panic territory since August 19th and the level generates a near 90% chance of higher equity prices in six months and a 97% probability of teen-like gains in the next 12 months (see Figure 3). Back in 2000 and 2008, there were indications of euphoria; not dour sentiment. Furthermore, the significant disavowal of equities as an investment asset class by the general public is obvious given the large US stock mutual fund withdrawals. Such a trend sends a fairly clear contrarian message of opportunity.

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