Citigroup: The only asset investors can use as a recession hedge this year

With fears of the worst yet to come for stocks, investors are looking for the best hedge against what’s to come.

Bank of America Analysts had predicted in a note on Thursday that stocks were still set to hit new lows, warning that the “inflation shock is not over yet.”

Morgan Stanley also warning earlier this month that investors should fasten their seat belts in the face of stock market turmoil, while Deutsche Bank there is a forecast The S&P 500 – trading at 3,860 on Friday morning – could drop to 3,000 points in the event of a recession.

The only reasonable fence

Based on CitigroupThe US dollar is the only reasonable hedge against the looming economic headwinds that will destroy riskier asset values.

In a research note on Thursday, lender strategists said a “deep recession” would be needed to significantly correct spiraling US inflation, which will continue. affect stocks.

They argue that the greenback’s inverse relationship with risky assets such as stocks, lived this yearhas made the US currency the best place for investors to tackle what could be a volatile rest of the year.

“The only place to hide is cash in US dollars,” Citi strategists said in the note.

Unusual running

Green silver coin has had an unusual run in 2022with the dollar index up about 15% so far this year to hit a 20-year high.

According to ING, the currency is capable of still at “high level” for the rest of the year.

However, despite its continued strength, some top investors disagree with using the dollar as a hedge against the ongoing volatility in the stock market.

Ray Dalio, founder of Bridgewater Associates — the world’s largest hedge fund —told CNBC “Cash is still trash” in May, citing the impact of inflation, but he noted that stocks could be an even worse bet.

Meanwhile, Lisa Shalett, CIO of Morgan Stanley Wealth Management, say on monday that investors should be “cautious” when it comes to the US currency, warning that its “extreme” strength could “lead to bouts of uncertainty”.

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