PULSE Monitor: Resilience or Complacency?

This is Citi Research's weekly US Equity Strategy PULSE Monitor. P ("Price") holds at negative as cross-asset valuations sit in the top decile on a 5yr lookback, yet forward multiples are less stretched. U ("Unanticipated") stays negative as cross-asset implied vols hover near the low end of the 5yr range alongside rising geopolitical tensions. L ("Liquidity") remains negative as domestic equity fund outflows continue for the third consecutive week. S ("Sentiment") stays negative, with multiples above the top end of the FV range and the Levkovich Index still in euphoric territory. E ("Earnings") is the lone positive, with healthy revision trends and 3Q index level estimates nudging higher. Despite the Iran conflict heating up and the Fed moving down a new tightening path, the index has held up — the S&P 500 sits just 2% below all-time highs against 10YYs backing up to 5%, 25bps from the Fed with three more hikes priced, and WTI breaking back above $100 just ahead of the midterms. We le