Citigroup lowered its year-end target for the S&P 500 and saw a downturn in the first half of next year, keeping its stock price unchanged in 2023. Scott Chronert, the company’s director of US equities strategy, cut its 2022 target to 4,000 from 4,200 and set a late 2023 target of 3,900. The downside target for 2022 still implies an 11% gain before the end of the year as Chronert believes recession risks have been priced in. The S&P 500 index closed Friday at 3,585.62, down more than 24% for the year. “The implication is that we see returns at the end of the year and a flat environment for ’23, even if recessionary conditions are expected in 1H ’23,” writes Chronert. “While the earnings growth outlook for ’23 looks positive, we continue to argue that the impact of a mild recession on earnings is likely to be less severe than feared.” Citi thinks an impending recession could prompt the Federal Reserve to back off from tightening monetary policy in a drastic way, giving some support to equity valuations. The company currently sees only a 20% chance of a so-called soft landing for the economy next year. Citi puts the chance of a mild recession at 60% and the chance of a severe recession at 20%. The company noted that it worries there could also be a systemic market arising from the Fed raising rates too quickly. “The Fed’s increasingly persistent focus on raising rates, until 2% inflation is visible, creates the risk of a policy spike and unintended consequences,” the note said. . Citi sees the S&P 500 ending 2023 at 3,250 if there is a severe recession.