U.S. stocks have priced in the greatest recession risk relative to other assets, Citigroup researchers said, warning that this is not enough as further losses loom following an “unusual” period for economies.

The benchmark S&P 500 index is firmly bearish, down around 22% year-to-date, as investors worry about rising interest rates, record inflation and the lingering impact of global supply chain issues that have rendered risk averse.

“No asset class overstates recession risk. But in relative terms, US equities have the most built-in recession risk,” a Citigroup team led by Alex Saunders said in a note dated Tuesday, adding that profit estimates still needed to be adjusted.

Analysts now expect quarterly earnings growth for S&P 500 companies of just 2.8% from a year ago, well below an 11.1% increase expected in early July, according to data from Refinitiv.

Still, some US stock market gauges that have issued warnings throughout the year ahead are more positive, while the S&P 500’s recent pattern of strong gains echoes those seen at earlier market lows.

Citigroup said earlier this month that it expects global stocks to rise around 18% by the end of 2023.

U.S. bonds had priced lower recession risk, the Wall Street bank said.

“Bonds may have to wait longer this time to assess recession risk given the Fed will remain hawkish for longer than usual,” the team wrote.

The industrials and financials sectors are not sufficiently factoring in recession risk among sectors, Citigroup said, with consumer discretionary being the least risky.

(Reporting by Siddarth S and Pushkala Ar

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