bank run blog

In an unusually frank assessment of the economic and financial landscape in the US, Citigroup analysts are warning investors to seek higher ground, according to MarketWatch :

“The Great Unwind has begun, Citigroup Inc. strategists warned on Wednesday.

As markets and economies de-leverage across the globe, investors should avoid companies and countries that have grown to rely too much on borrowed money, they said.

That means favoring public-equity markets over hedge funds, private-equity and real estate, while leaning toward emerging market countries and away from developed nations like the U.S., the bank’s global equity strategy team advised.”

The newly cautious approach advises shunning the over-leveraged financial and banking sectors for the foreseeable future. Citi suggests focusing on emerging markets, as opposed to “mature” markets in Europe and the US :

“Leveraged economies, like the U.S., should also be avoided, in favor of emerging market countries, which have reduced borrowing, the bank advised.

With less capital sloshing around the world, and the dollar falling, the U.S. may have to compete more to finance its deficits.

‘The U.S. shows up as the world’s greatest consumer of external capital,’ Citi noted. So it ‘has the most to lose as this capital becomes less freely available.’”

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