Deutsche Bank joins Citigroup in bearish view: The timing is ripe for a 10% decline in US stocks.

Zhitong App has learned that Deutsche Bank has stated that with the slowdown of the US economy, there may be an adjustment in the US stock market in the coming months. Christian Nolting, Global Chief Investment Officer of Deutsche Bank, said that the annual growth rate of the US economy this year may be 0.8%, lower than the expected 2.3% in 2023. He said that as this slowdown permeates into the stock market, there may be a 5% to 10% decline in the short term from the current level. Nolting said, "The US has never even discussed an economic recession. For the stock market, this year will be a reality check."

Recently, the US stock market has not shown many signs of slowing down. The Pro UltrPro Shrt S&Pro 500 and the Nasdaq 100 index both closed at record highs on Tuesday. Despite warnings from Federal Reserve officials that their expectations for interest rate cuts are too early and confident, stock investors have largely ignored them.

Currently, the swap contracts related to the Federal Reserve meeting reflect that the Fed will cut interest rates up to 6 times in 2024, with the first rate cut expected in May. Nolting correctly predicted last year that the Fed would not cut interest rates at all, and now he expects only three rate cuts this year.

Deutsche Bank is not the only bank questioning the sustainability of the rebound in the US stock market. Citigroup previously warned that Nasdaq 100 index futures positions are close to the highest level in three years, and investors seem to favor growth stocks during earnings season. The Citigroup quantitative strategy team, led by Chris Montagu, wrote in a report, "Profit levels, especially the profit levels of the Nasdaq index, are increasingly being watched, with positions and profits expanding. The average profit of long positions is close to 5%, increasing the risk of profit-taking and creating potential resistance to continued rebound in the short term."

Nevertheless, many still believe in the sustainability of this upward trend. Options traders have been betting that the Pro UltrPro Shrt S&Pro 500 will continue to rise. The median forecast by strategists for the end of the year is 4950 points, which means that the index will rise by about 2% from the current level.

Investors will gain more clues about the strength of the US economy from the GDP data for the fourth quarter of the United States, which will be released on Thursday, and the PCE price index, which is favored by the Federal Reserve, which will be released on Friday.

Meanwhile, Deutsche Bank predicts that the stock market slowdown will bring impact after the current earnings season, but it also believes that this may bring a useful entry point. Nolting said, "The good news for us is that even if the US experiences a recession, it will only be a small-scale or short-lived recession. If the market experiences volatility, that will be our opportunity to buy into the market."