Citi (NYSE:C) is boosting its stock forecast for 2020, despite growing uncertainty about the future regulatory environment for business as the U.S. barrels toward a contentious presidential election.
The bank raised its year-end 2020 S&P 500 target slightly to 3,375 from 3,300, because of the better gains this year versus the 3,050 objective for 2019. The index is up more than 5% over the past three months amid growing optimism about a phase-one trade deal with China. It has seen a more than 19% gain over the past year.
The S&P 500 was back into positive territory by Friday’s close, erasing much of the losses for the week.
Citi said the S&P 500 could even see a run-up in the first half of the year to 3,500 as the economy appears firmer and global industrial conditions increase. A weaker dollar could emerge and further accelerate interest in value equities areas like emerging markets, according to the bank.
However, Citi cautioned that the outlook is uncertain due to the looming election. Higher taxes and tighter regulation are likely next year if the Democrats win the presidential election, even though the party’s moderate candidates have gotten a boost in the polls recently.
A Donald Trump re-election would bring its own risks of unpredictable policy on trade, diplomatic relations and global order.
The second half of 2020 could prove more challenging, the bank noted, as surveys indicate rising unemployment rates and tighter profit margins in the fourth quarter. The yield curve also suggests volatility by late 2020.
C shares faded 51 cents Monday morning to $75.30
