Citi and JPMorgan willing to invest in underperforming S&P 500 companies for short-term gains

Citi and JPMorgan, two major Wall Street players, are willing to take risks by investing in shares of underperforming American companies. According to the strategists, this approach could allow the firms to secure quick, short-term gains. In the coming weeks, they plan to focus particularly on construction firms and technology equipment producers, Bloomberg reports.

Stuart Kaiser of Citigroup attributes this investment strategy to the temporary lull in the US stock market. Initially, Trump's import tariffs caused a sharp decline in S&P 500 stock prices. However, after successful trade negotiations between the United States and China last weekend, the index managed to offset its previous losses. Kaiser believes that traders who missed out on the favorable market conditions will now seek alternative profit opportunities. Investing in underperforming companies, many of which have yet to recoup their losses, is one way of doing so.

Confirming the strategy's success, the Goldman Sachs Weak Balance Sheet Index, which tracks about 50 small-cap firms, outperformed the S&P 500 in seven out of the past eight trading sessions.