(Reuters) – Citigroup is expecting global equities to rise about 18% from now through the end of 2023, saying beaten down valuations from a relentless selloff this year may attract investors, although it warned of “considerable risks” of an economic slowdown.

Global stock are trading well below their peaks, with the U.S. benchmark S&P 500 index in a bear market for most of this year as central banks’ war on inflation has led to a steep rise in interest rates and sparked fears of an economic downturn.

Strategists from the Wall Street bank on Thursday set a target of 780 points for the MSCI AC World Index (Local), which includes emerging markets, for end-2023, compared with 679 points it hit on Sept. 30.

“Highly valued stocks have been hit hard, with the MSCI AC World Growth index derating from 31x to 19x,” Citi’s Robert Buckland said, referring to price-to-earnings(PE) ratios. “We think much of this derating is now done.”

That has made valuations look more attractive for now, Buckland said, with U.S. equities the most expensive and the UK and emerging markets (EM) the cheapest.

Citi maintained an “overweight” rating on U.S. equities, saying a strong dollar would continue to boost the relative performance of those stocks.

It also backed its “neutral” rating for EM stocks and “overweight” rating on UK equities.

“The UK economy is in trouble, but 70% overseas exposure and cheap valuations should limit the damage for the stock market,” the brokerage said.

Many blue-chip London-listed companies earn a sizable portion of their revenue overseas, while the benchmark FTSE 100 index includes a number of heavyweight commodity-related companies.

Citi also raised its rating on the global information technology sector to “overweight”, citing more reasonable valuations and worsening earnings prospects elsewhere.

It said analysts’ consensus estimate of a 6% rise in global earnings per share in 2023 “may prove too optimistic” and forecast earnings to decline 5% next year.

(Reporting by Siddarth S and Pushkala Aripaka in Bengaluru; Editing by Savio D’Souza and Anil D’Silva)