Strategists at Citi have pointed to four U. S. stock strategies that break with a crowded consensus.
“There are four points that still seem very much consensus-like yet do not have the kind of solid backup data,” Citi said in a note dated late Wednesday U. S. time. “There’s opportunity in going against the grain.
1. Equity market valuations aren’t actually terribly expensive, Citi said.
Analysts have been citing the Shiller cyclically-adjusted price-to-earnings ratio (CAPE) as indicating stocks are expensive, Citi noted, but it added that while the level was fairly high compared with its history, that may not mean much.
“It is cited regularly by bears, with barely any evidence that it is worth tracking,” Citi said. “The CAPE has extremely low predictive correlation when looking out a year. ”
In fact, the real issue was a plunge in energy industry capital expenditure, it said.
“While the popular narrative of weak business investment has been ongoing for two years at a minimum, the hard numbers indicate that such thinking is simply wrong,” it said. “The oil patch’s pricing issues hammered this one area and it is recovering now. IT budgets, for example, never faltered even as too many investors focused on buybacks which were fairly concentrated. ”
Citi noted that more corporate investment could be on the cards as well, noting a policy proposal to allow first-year 100 percent depreciation write-offs, which could spur spending in 2017 and 2018.
3. Citi isn’t buying into the consensus view that U. S. small caps were likely to outperform large caps.
“The likelihood of even higher bond yields is growing as growth and nascent inflation combine with fiscal stimulus that probably won’t be as revenue neutral as might be suggested. Add in a border tax possibility and everyone flocks to small caps,” Citi said.
But the bank still expected large caps will outperform.
“Higher yields usually mean large caps do better,” it said. “A powerful dollar surge would drive small caps but the greenback already has moved sharply in the past few months and future gains might be much harder to come by. ”
In the wake of Donald Trump’s surprise U. S. election win, the dollar index, which measures the greenback against a basket of currencies, surged to a 14-year high. Larger companies tend to have more overseas earnings, which would be hurt when they are translated back into the greenback.
Trump has since floated the idea of a “border tax” to discourage imports into the U. S. Since larger companies tend to be more likely to import components, equipment or products, tariffs would hurt them more than smaller companies.
“Liking Media stocks generates ‘raspberries’ as the Street remains deeply concerned about cord-cutting and pricing issues,” it said. “However, valuation and earnings revision momentum support the industry group’s relative outperformance potential as might M&A activity. ”
Citi also noted that new technology, such as virtual and augmented reality, could also drive the sector.
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Rebecca Hersher
Former MF Global CEO Jon Corzine arrives on Capitol Hill in 2011.
Susan Walsh/AP
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Former MF Global CEO Jon Corzine arrives on Capitol Hill in 2011.
Former MF Global Chief Executive Jon Corzine will pay a $5 million penalty for his role in the company’s collapse, according to the U. S. Commodity Futures Trading Commission.
MF Global collapsed in 2011, and hundreds of millions of dollars in customer money disappeared, as we reported .
Under the terms of the settlement , Corzine, who has also served as the governor of New Jersey, is barred from commodity trading and cannot use insurance money to pay the penalty. A statement by the CFTC says the amount of customer money the company run by Corzine mishandled is nearly $1 billion.
The former assistant treasurer of MF Global, Edith O’Brien, will pay a $500,000 civil penalty in a separate settlement with the regulatory agency , which was also announced Thursday.
As we reported in 2013 , the approximately 26,000 MF Global customers who lost money in the company’s collapse were expected to recoup their entire investments in a court deal that freed up funds from other parts of MF Global’s parent corporation.
Corzine has apologized to customers for the company’s collapse, saying at a 2011 congressional hearing:
“I appear at today’s hearing with great sadness. My sadness, of course, pales in comparison to the losses and hardships that customers, employees and investors have suffered as a result of MF Global’s bankruptcy. Their plight weighs on my mind every day — every hour. And, as the chief executive officer of MF Global at the time of its bankruptcy, I apologize to all those affected. ”
The Wall Street Journal reported Corzine “said he accepted responsibility for the company’s failure and is pleased to have reached a settlement. ”
The paper also reported criminal prosecutors had investigated Corzine and other former executives over their role in the company’s bankruptcy, which was the result of billions of dollars of bad bets on European bonds, but they brought no criminal charges.

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Fixed mortgage rates, which have been on a tear since the presidential election, retreated this week, falling for the first time in nine weeks.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average tumbled to 4.2 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.32 percent a week ago and 3.97 percent a year ago.
The 15-year fixed-rate average sank to 3.44 percent with an average 0.5 point. It was 3.55 percent a week ago and 3.26 percent a year ago. The five-year adjustable rate average slipped to 3.33 percent with an average 0.4 point. It was 3.3 percent a week ago and 3.09 percent a year ago.
The retrenchment comes as investors begin to temper their enthusiasm. The post-election climb of home loan rates and selloff in the bond market was attributed to investors’ beliefs that the new administration will spend freely to boost the economy. Now reality is setting in.
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