Citi advises investors to "buy pullbacks" and claims the S&P 500 is not in a bubble

The recent market surge, which was triggered by Nvidia's impressive earnings beat and outlook, has raised awareness of S&P 500 values and made them a top worry for investors as the index hit new all-time highs.

Analysts at Citi commented on the issue, stating that they continue to retain the fundamental belief that valuations are more meaningful when analysed in conjunction with projections for underlying growth and less predictive of future performance when seen alone.

According to Citi, the S&P 500's roughly 7% gain so far this year highlights the need for fundamental growth fundamentals to materialise and continue the market's upward trend. Investors are essentially making advances based on projected future profit growth.

In response to previous comparisons made between the tech boom and the present bull market, Citi also noted that valuation multiples now are far lower than they were in 1999–2000.

The strategists believe that the current state of affairs differs significantly from the late 1990s because of a shift in the market's basic fundamentals.

Furthermore, Citi has stated that in order to attain new index peaks, market widening is essential. While it is true that a small number of mega-cap firms have driven the S&P 500 to all-time highs, accounting for about half of the index's gains, Citi also pointed out that the number of stocks hitting 52-week highs has increased dramatically.

The analysts concluded by saying that the S&P 500 has started a new bull market because a large number of American firms have emerged from the pandemic with a stronger focus on their operations, substantial cash flow, and a dedication to increasing productivity.

In addition, the tech industry is undergoing a revolutionary shift due to the emerging revolution spearheaded by generative artificial intelligence.

(Sources: investing.com, reuters.com)