The bull-market rally in US stocks is about to run out of steam, according to Citigroup.
Strategists at the bank led by Scott Chronert this week reiterated their call for the S&P 500 Index to tumble to 4,000 by year-end, and initiated a new target of 4,400 by mid-2024, or just below the 4,418 level the benchmark was trading at late Friday.
A lack of concrete earnings revisions and a looming US recession will catch up with ballooning share prices, while many key measures of investor psyche suggest wariness around the S&P 500’s latest breakout, Mr Chronert wrote in notes to clients this week.
The Levkovich Index, a sentiment gauge, remains in “panic” territory at -0.18, while his team called the equity flow backdrop “putrid”.
“Combined, this implies this move above 4,400 on the S&P 500 is relatively unloved,” he wrote.
Even as equities have defied naysayers in recent months, Mr Chronert remains among a chorus of Wall Street bears unconvinced the rally has legs.
Bank of America’s Michael Hartnett said on Friday that it was unlikely that a “brand, new shiny bull market,” is under way, comparing the current set-up to 2000 or 2008. Prominent bearish voices like Morgan Stanley’s Mike Wilson and JPMorgan Chase & Co’s Marko Kolanvovic have also doubled down on their downbeat forecasts this week.
The S&P 500 closed 0.37 per cent lower at 4,409.59 at the end of the trading session on Friday.
It’s a pivotal moment for Wall Street strategists tasked with predicting where the stock market will go after the consensus bearish outlook heading into 2023 failed to come to fruition. The common view was that stocks would drop in the first half and recover to close little changed from late 2022 levels by the end of the year. Instead, the S&P 500 is up more than 15 per cent year-to-date and Nasdaq 100 nearly 40 per cent
While big names including BofA’s Savita Subramanian and RBC’s Lori Calvasina have modified their calls, those who remain adamant a downturn awaits are in for a big test as the second half of the year gets under way.
“While acknowledging we missed the AI euphoria to grip mega cap growth cohort, lack of concrete earnings revision support implies a digestive phase” in the second half, Mr Chronert wrote earlier this week.
“As enticing as it may be to follow the tape and nudge our year-end target higher, we just do not see the fundamental justification for this, yet.”
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
Zayed Sustainability Prize
Cricket World Cup League Two
Oman, UAE, Namibia
Al Amerat, Muscat
Results
Oman beat UAE by five wickets
UAE beat Namibia by eight runs
Fixtures
Wednesday January 8 –Oman v Namibia
Thursday January 9 – Oman v UAE
Saturday January 11 – UAE v Namibia
Sunday January 12 – Oman v Namibia
