SAN FRANCISCO
(MarketWatch) -- "The Great Unwind has begun, Citigroup Inc.
strategists warned on Wednesday.
As markets and economies de-leverage
across the globe, investors should
avoid companies and countries that have grown to rely too much on
borrowed money, they said.
That means favoring
public-equity markets over hedge funds, private-equity and real estate,
while leaning toward emerging market countries and away from developed
nations like the U.S., the bank's global equity strategy team advised.
Within equity markets,
the financial-services should be avoided because it's still
over-leveraged, while other companies have stronger balance sheets, the
strategists said.
"Steady growth, low
inflation and rock-bottom interest rates encouraged economic and
financial participants across the world economy to gear up over the
past few years," Robert Buckland and his colleagues on Citi's global
strategy team wrote in a note to clients. "Easy money encouraged many
to buy a bigger house, a bigger car or a bigger speculative position."
"But now, any behavior
that relied upon continued access to easy money is being dramatically
reassessed," they added. "Leveraged banks must lend less, leveraged
consumers must consume less, leveraged companies must acquire or invest
less, and leveraged speculators must speculate less."
Financial-services
companies are the most vulnerable to this reduction of borrowed money
across the globe, they said..."
