Citigroup lowered its year-end target for the S & P 500 and sees a recession in the first half of next year keeping a lid on stock prices in 2023. Scott Chronert, the firm’s chief U.S. equity strategist, cut his 2022 target to 4,000 from 4,200 and established a 2023 year-end target of 3,900. The lowered target for 2022 still implies a 11% increase before the end of the year as Chronert believes the recession risk is already priced in. The S & P 500 closed Friday at 3,585.62, down more than 24% for the year. “The implication is that we see upside to year end, and a flattish environment for ’23, even as recession conditions are expected for 1H ’23,” wrote Chronert. “Although the earnings growth outlook for ’23 looks aggressive, we continue to argue that a mild recession impact on earnings may be less severe than feared.” Citi believes the impending economic downturn may cause the Federal Reserve to back off its aggressive tightening of monetary policy, supporting equity valuations a bit. The firm now sees just a 20% chance of a so-called soft landing for the economy next year. Citi puts the chances of a mild recession at 60% and a 20% chance at a severe downturn. The firm noted it is worried there also could be a systemic market issuing arising from the Fed raising rates too quickly. “An increasingly persistent Fed focus on raising rates, until such time as 2% inflation is visible, creates a growing risk of a policy overshoot and unintended consequences,” the note said. Citi sees the S & P 500 ending 2023 at 3,250 if there is a severe recession.