Citigroup’s Bear Market Checklist flagged 10 of 18 global risk indicators, the highest since 2008, with the US at 11.5 flags and Europe at 5. Elevated valuations, optimistic sentiment, AI-driven capital expenditure growth, and increased IPO issuance drove the checklist higher, yet Citigroup maintains a constructive outlook to year-end.
Citigroup’s proprietary Bear Market Checklist has reached 10 out of 18 flags globally, marking the highest risk reading since 2008. The checklist aggregates indicators on valuations, sentiment, credit conditions, market technicals and economic signals to assess potential downturn risk.
In the US, the checklist stands at 11.5 flags while Europe registers 5 out of 18, reflecting more pronounced froth in American equity markets. These regional scores highlight divergent risk levels across major markets.
Key contributors to the elevated flag count include stretched equity valuations, heightened investor optimism, accelerated AI-driven capital expenditure and a surge in IPO activity and equity issuance. Tight credit spreads have provided some offset but remain a secondary consideration.
Historically, the checklist has tended to accelerate once it crosses into double digits, with past peaks reaching 17.5 flags in 2000 and 13 before the 2008 crisis. Despite the elevated reading, Citigroup retains a constructive stance on equities through year-end, noting current conditions remain below past bear market thresholds.
Marketwatch
