They tallied up the performance of their so-called “Christmas Lunch” report that publishes at the end of every year, and focuses on contrarian picks across sectors, countries and assets. “It is named in tribute to end-year stock picking competitions at investor Christmas lunches where few participants can resist making big contrarian calls,” explains the Citi team in a note released on Monday.

On average, the 10 bullish stock picks made via the “Christmas Lunch” strategies are collectively up 23% — they include outperformers such as Meta Platforms
META,
+0.26%
and Tesla
TSLA,
+3.10%.
Bearish picks, such as Occidental Petroleum
OXY,
-2.83%
and Exxon Mobil
XOM,
-3.85%,
are mostly flat so far this year. That’s as the S&P 500
SPX,
-0.28%
has gained 6% so far in 2023 and the Nasdaq Composite
COMP,
-0.58%
more than 12%.

Here’s Citi’s chart summing up those performances:

In short, the big contrarian call for 2023 was bullish/long on tech stocks, after 2022’s dismal performance. The bank’s long-short equity call, which basically dictates that investors take bullish positions in stocks expected to appreciate and bearish positions in those expected to fall, peaked at 33% on Feb. 2, the strongest start to a year since 2011, Citi noted.

Buckland and the team say selling winners and buying losers worked due to dovish signals from central banks pushing bond yields
TMUBMUSD10Y,
3.821%

TMUBMUSD02Y,
4.629%
lower and tech stocks higher, while hopes that the economy will downshift slowly without a recession — a “soft landing” — have weighed on defensive stocks, and oil companies
XLE,
-3.56%
have dropped amid falling oil prices
CL.1,
+0.89%.

But they say it’s not uncommon for these types of contrarian strategies to perform well early on, as investors price in a reversal of the prior year’s themes, but then fade amid the realization that little has changed.

“We think most of this year’s contrarian trades will fizzle out, as they usually do. Hence, we wouldn’t chase the headline equity indices higher, and prefer oil stocks to tech. China-reopening is one trade we would chase,” said the Citi team.

That caution echoes what’s being heard elsewhere on Wall Street. Morgan Stanley’s Mike Wilson warned clients on Sunday that a speculative frenzy based on false hopes surrounding the Fed is pushing stocks into a so-called “death zone.” JPMorgan has also been vocal about warnings that U.S. equities have peaked.

Also: The end of easy money is bad news for these stock sectors, says Evercore

“We are wary of the soft-landing story and think EPS [earnings per share] forecasts are still too high, especially if the U.S. economy drops into recession in 2H23 [the second half of 2023]. The tech stock rally has left valuations looking stretched, and the sector is vulnerable to further earnings disappointments,” added Citi.

Tech stocks haven’t been the only winners so far this year. Another die-hard “Christmas Lunch” contrarian strategy that’s up 4% year to date involves bullish positioning on emerging and developed equities and bearish bets on the U.S. dollar
DXY,
+0.07%
and commodities, said Citi. Country-specific contrarian strategies that went bullish on Asia and the U.S. are also off to a strong start, while commodity-related markets such as Australia
XJO,
+0.06%,
Brazil
BVSP,
-0.70%
and Canada
180906,
-0.49%
are lagging.

And: Buy the stock-market dip? Why ‘cash’ yielding more than it has since 2007 could be king.