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June 1, 2020, 10:57 a.m. EDT

The stock market isn’t reflecting reality yet, but Citigroup warns that pain and ‘collateral damage’ are on the way

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By Shawn Langlois, MarketWatch


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Pain lies ahead?

‘We definitely feel that the markets are way ahead of reality. We really are telling every client to tap the market if they can because we think the pricing now couldn’t get any better.’

That’s Manolo Falco, Citigroup’s /zigman2/quotes/207741460/composite C +6.47% co-head of investment banking, explaining to the Financial Times why he believes the firm’s corporate clients should raise as much cash as possible before the reality of the pandemic sinks in for investors.

“As the second quarter comes along and we start seeing the pain, and the collateral effects of that,” Falco continued, “we think this is going to be much tougher than it looks.”

To his point, last month wasn’t so tough, in terms of market performance. The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.44%  , S&P 500 /zigman2/quotes/210599714/realtime SPX +1.05%  , and tech-heavy Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.66% all closed the books on a strong May on Friday, buoyed by mounting optimism over the easing of lockdowns in the U.S. along with a supportive Federal Reserve.

This while global economies continue to grapple with historic recessions.

“Markets are pricing a V [shaped recovery], everyone’s coming back to work, and this is going to be fine,” Falco told the FT. “I don’t think it’s going to be that easy quite frankly.”

Read: CNBC’s Jim Cramer says a quick recovery is ‘tough to bet on’

After showing weakness overnight, stocks are trading higher to start the week, with the blue chips getting a boost from Boeing /zigman2/quotes/208579720/composite BA +2.98% and American Express /zigman2/quotes/203805826/composite AXP +2.94%  .

/zigman2/quotes/207741460/composite
US : U.S.: NYSE
$ 52.65
+3.20 +6.47%
Volume: 28.03M
July 10, 2020 4:02p
P/E Ratio
7.30
Dividend Yield
3.87%
Market Cap
$109.61 billion
Rev. per Employee
$479,167
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
26,075.30
+369.21 +1.44%
Volume: 337.36M
July 10, 2020 5:09p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,185.04
+32.99 +1.05%
Volume: 2.41B
July 10, 2020 5:09p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
10,617.44
+69.69 +0.66%
Volume: 3.19M
July 10, 2020 5:16p
loading...
/zigman2/quotes/208579720/composite
US : U.S.: NYSE
$ 178.44
+5.16 +2.98%
Volume: 40.96M
July 10, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$100.70 billion
Rev. per Employee
$660,961
loading...
/zigman2/quotes/203805826/composite
US : U.S.: NYSE
$ 93.23
+2.66 +2.94%
Volume: 4.40M
July 10, 2020 4:02p
P/E Ratio
14.13
Dividend Yield
1.84%
Market Cap
$75.05 billion
Rev. per Employee
$733,559
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Shawn Langlois is an editor and writer for MarketWatch in Los Angeles. Follow him on Twitter @slangwise.

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