Citigroup (NYSE:C) Raises U.S. Equities to "Neutral"

Citing profits for U.S. companies improving, Citigroup (NYSE:C) raised the overall U.S. equities sector to a "Neutral" rating.

Robert Buckland, Citigroup’s London-based chief global equity strategist, said, “Earnings momentum is improving, although valuations stop us from moving all the way to overweight.”

There is a big question lingering over equities, as Citigroup mentions, with valuation high and a significant economic turnaround yet to happen.

An irrational exuberance is pervading the markets now, but that will eventually come crashing down as the fallout from government policies and the implementation of QE2 by the Federal Reserve unfolds.

The seemingly unending coverage of lower unemployment is unconvincing as well, as we'll have wait until after the Christmas layoffs are counted before we really know the condition of the job market, although it remains weak by any metric used.

The increase in applications for unemployment benefits last week confirms this is the case.