Stop worrying about a recession - but it's still time to dump overvalued Big Tech stocks, Citi strategist says
- If the US economy suffers a recession, that won't happen until next year, according to one Citi strategist.
- Investors should pile into smaller-cap stocks with Big Tech looking overvalued, according to Robert Hoffman.
The US economy won't slip into a recession this year – and that creates an opportunity for investors to ditch Big Tech and load up on mid- and small-cap stocks, according to a Citi Private Bank strategist.
Robert Hoffman said Friday that he's anticipating "a strong rebound" for companies with lower valuations, because he's believes the economy will either avoid a recession altogether or suffer a later-than-expected slowdown.
"What we were originally anticipating – a recession towards the end of 2023 – has now been pushed very far off, we're actually looking much closer to the end of 2024 now," Hoffman, the bank's head of investment counselors in South Asia, told CNBC International.
"We think the US mid-cap space offers very compelling valuations and an opportunity if you do avert a recession or should it get pushed further out," he added.
Hoffman's prediction that there won't be a recession this year comes despite many economists warning that a slump could be looming and US GDP growth slowing to just 1.1% last quarter.
A handful of large-cap tech stocks - including Nvidia, Meta Platforms, and Tesla – have shaken off those gloomy circumstances to power the S&P 500 15% higher, with investors piling into the mega-cap names in a bid to take advantage of the explosion of interest in artificial intelligence.
But those stocks "have gotten far ahead of themselves as far as current market valuations" are concerned, Hoffman said – while maintaining that investors can still find returns in other, smaller S&P 500 names.
"I would say 90% of the companies in the S&P 500 have not outperformed the broad S&P benchmark this year – so there's tremendous value still existing within the S&P 500," he said.