By Senad Karaahmetovic

Dirk Willer, Citi strategist, downgraded U.S. equities from neutral due to recession risks.

This move follows warnings from several investment managers and banks about an economic slowdown due to the Federal Reserve’s tightening of its monetary policy in order to combat inflation.

“While a US recession is not the base case for Citi economics, uncertainty is very high, and the Fed seeming to guide for recession is not reassuring. While typically equities only peak shortly before the start of a recession, this time it may happen earlier than we expected, potentially because we have elements of a deflating bubble,” Willer wrote in a note.

Willer, along with his coworkers, recommend that you go long on healthcare and consumer staples over technology and finances.

Citi also lifted its rating on U.S. government bonds from underweight to neutral and reiterated its optimistic stance on Chinese stocks and sovereign bonds, saying it wants to have exposure to the country’s assets “with China being the only major market where authorities are at least marginally supportive.”

Although the flagship has fallen 15% from the beginning of 2022 to the present, the performance tracking indicator ticked is now showing its first weekly increase since April.