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Levkovich Shifts From Most Bullish to Most Bearish (Update 1) 

By Whitney Kisling

Oct. 7 (Bloomberg) -- Citigroup Inc.'s Tobias Levkovich cut his Standard & Poor's 500 Index forecast by 19 percent to 1,200, turning him from the most bullish U.S. equity strategist tracked by Bloomberg to the most bearish.

The new projection represents a 20 percent gain from today's close of 996.23 through the end of the year. Levkovich, 47, said the credit crisis and a slowing global economy made his previous forecast of 1,475 unreachable. The S&P 500 has plunged 36 percent since its October 2007 record under the weight of almost $600 billion in subprime-related losses at banks and an increase in borrowing costs.

Levkovich is the third of nine strategists to cut estimates since Lehman Brothers Holdings Inc. filed for bankruptcy on Sept. 15, according to data compiled by Bloomberg. On average, the analysts project the S&P 500 will end the year at 1,344. That would require a fourth-quarter advance of 15 percent, the steepest quarterly gain since the final three months of 1998.

``The anxiety generated by collapsing international stock markets, weaker economies around the world and the failure of a number of leading financial institutions made our previous year- end S&P 500 forecast both stale and improbable,'' New York-based Levkovich wrote today in a note titled ``Eating Humble Pie.''

Levkovich said a month ago that he was sticking with his year-end estimate even though he was getting ``enormous pushback'' from clients. He said he was eating more doughnuts to cope with the pressure.

`Questioning Our Premises'

``I spend a lot of time questioning our premises, mostly on the drive home at night,'' he said during an interview last month. ``Unless something's broken down on the analytical front, you go past it.''

He added at the time: ``You revert back to the analysis, not to how you feel. Emotion's your enemy, not your friend.''

The S&P 500 lost 9.1 percent last month, the biggest monthly decline since September 2002, after the government took over Fannie Mae, Freddie Mac and American International Group Inc., Lehman filed for Chapter 11 and Merrill Lynch & Co. was forced to sell itself to Bank of America Corp. It has already lost 15 percent in October.

Levkovich expects the S&P 500 to end 2009 at 1,300. The benchmark index for U.S. stocks dropped 5.7 percent today and fell below 1,000 for the first time since October 2003.

Wachovia Corp.'s Bill O'Grady, based in St. Louis, is now the most bullish with his forecast that the S&P 500 will end 2008 at 1,435. Jason Trennert, based in New York with Strategas Research Partners, reduced his estimate by 12 percent to 1,300 in late September. Deutsche Bank AG's Binky Chadha cut by 18 percent to 1,350 on Sept. 22.

Levkovich cited ``cash hoarding'' as a reason for his new forecast.

``There needs to be more willingness to take risk than we think is forthcoming in a de-leveraging world,'' he said.

To contact the reporter on this story: Whitney Kisling in New York atwkisling@bloomberg.net.