Citi says global markets are frothiest since 2008

Citi Warns Global Markets at Frothiest Level Since 2008

Citigroup strategists warned on Friday that global stock markets have reached their most elevated risk levels since the global financial crisis, even as equities continue to push toward record highs fueled by AI-driven earnings growth.

The Bear Market Checklist Flashes Red

Citi’s proprietary Bear Market Checklist now stands at 10 out of 18 flags globally, its highest reading since 2008, according to a note led by Beata Manthey, the bank’s head of European equity strategy. The U.S. reading is even more elevated at 11.5 out of 18, according to Pluang, which cited the Citi research. The checklist evaluates factors including equity valuation, investor sentiment, credit spreads, yield curves, fund flows, and corporate fundamentals.morningstar

For context, Citi’s checklist registered 13 warning flags ahead of the 2007–2008 bear market and 17.5 before the dot-com crash. As recently as mid-2022, only six indicators were flashing after markets had already corrected sharply.theglobeandmail

A $6 Trillion Wealth Effect

The warning arrives as the S&P 500 has gained roughly 11% year-to-date, with the index recently notching its ninth consecutive day of gains. Separately, Bank of America strategist Michael Hartnett estimated that U.S. household equity wealth has risen by $6 trillion so far in 2026, following gains of $10 trillion in 2025 and $9 trillion in 2024.investing

Hartnett has separately cautioned that bullish investor positioning leaves markets vulnerable to a reversal. A Bank of America fund manager survey earlier in May showed investors increased their allocations to stocks by the most on record, leaving the market within a “chip shot” of hitting a technical sell signal.morningstar

Bull Case Persists Despite Froth

Despite the elevated checklist reading, Citi has not called for an outright retreat from equities. The bank’s 2026 base-case target for the S&P 500 remains at 7,700, supported by what it describes as aggressive index earnings of $320. Manthey told Bloomberg in May that European equities could rise another 5% by year-end, driven by “an explosion of earnings”. Citi has characterized its broader outlook as “a Persistent But Volatile Bull”, acknowledging that strong corporate fundamentals — particularly in AI-related sectors — continue to underpin the rally even as valuation metrics flash caution.bloomberg