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Citi and Credit Suisse lowered year-end targets for the broader stock market Monday, with Citi bearish on 2023 and Credit Suisse looking for lower-than-average returns.

Citi cut its 2022 S&P 500 (SP500) (NYSEARCA:SPY) target to 4,000 from 4,200, which would still mean a rally of more than 10% into the end of the year.

“We continue to expect a Q4 risk on rally predicated on currently poor sentiment and positioning indicators, Q3 earnings resilience, and short-term relief from recent interest rate and currency trajectories,” Citi strategist Scott Chronert wrote in a note.

Credit Suisse is cutting its target for 2022 to 3,850 from 4,300, a rise of more than 7% from current levels.

“We expect a reversal of spreads and volatility, leading to 1-2x multiple points of rerating through year-end,” CS strategist Jonathan Golub said.

For 2023, Citi expects the S&P to end lower than where it starts, down to 3,900.

“We expect recession related earnings to have a downward bias during 2H, but with valuation expansion as the market looks through to a ’24 earnings stabilization/improvement,” Chronert said.

“In our view, there are a two tail risks to this base case,” Chronert added. “The first is that the current rapid pace of Fed rate hikes results in unintended consequences and/or systemic issues. Much market narrative is currently focused on this.”

“The second is that inflation/economic data deteriorate more quickly than currently discussed, thus triggering a quick resolution to expected Fed hawkishness. In our view, this would be the bigger surprise, per the current Levkovich Index reading.”

Credit Suisse set a target of 4,050 for the end of 2023, up 5% for the year, with returns “primarily driven by earnings growth.”

Morgan Stanley argues stocks will need a Fed pivot to rally because one stat is in the Danger Zone.

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