Play Equities Before Liquidity Dries Up: Citi's Levkovich

The S&P 500 has started the year with a five-day winning streak and historically, there is correlation between the first five days of trading and the rest of January. What does this really mean for the market and investors? Tobias Levkovich, chief U.S. equity strategist at Citigroup, shared his insights.

The January Indicator
The January Indicator   

“If you’re up for the first five days, then 75 percent of the times you’re up for the rest of the year,” Levkovich told CNBC.

“And if you’re down the first 5 days, then only 44 percent of the time are you up for the full year.”

However, Levkovich cautioned investors, saying they need to be careful when looking at a single indicator as being the end-all. After all, he said, the trend did not apply to the markets in 2009.

“Historically, the year after which recessions end, the earnings are up double digits and the market is only up slightly—that might the more likely scenario we have here,” he said.

“While it isn’t gang-buster, I think we can make some money at the beginning of the year and then, as you move into the second quarter, is when you’ll see liquidity withdrawing and leading to multiple compression.”

Citigroup S&P Survey

According to a recent survey by Citigroup, its clients said the S&P is likely to finish the year around 1,210. The survey also suggested that IT and energy are the best sectors to be in, while investors should avoidutilities, telecom and consumer-related sectors.

“You’ve got to be able to be more nimble with your money,” said Levkovich. “Early part of the year, you should be in equities. Earnings will be there and will be better than expected…You’re going to have some good numbers.”

  • Watch Levkovich's Previous CNBC Appearance (Dec. 29, 2009)

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Disclosures:

No immediate information was available for Levkovich or his firm.

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