While 2018 has injected a wave of volatility into the nine-year bull market, causing many to become fearful of a looming correction, one team of analysts on the Street suggests that global equities still have room to run. (See also: Trade War Could Tip US Into Full Recession: BofA.)

In a note released Wednesday, bulls at Citigroup Inc. wrote that "it is still too early to call the end of this bull market," recommending that investors "keep buying the dips." Equity strategists suggest that only three of 18 of the "red flags" that they say signal a downturn have been raised. They forecast for global stocks to grow 9% over the next 12 months.

February Marks 'Phase Three' 

The team of Citi researchers is particularly bullish on emerging markets, despite their recent weakness due to fears of a rising U.S. dollar. Citigroup expects the strength of the dollar to be offset by "rising U.S. fiscal and current-account  deficits," that will "eventually prove a drag." Ultimately, this weaker dollar should help U.S. equities outperform, according to the investment firm, which also views continental Europe as a market driver in the upcoming period. 

"Late cycle bull markets typically narrow into growth and momentum trades," read the Citi note. "This should favor U.S. equities and information technology stocks. Emerging markets remain our favorite value trade.”

Citigroup's chief U.S. strategist Tobias Levkovich upgraded his rating on domestic equities to overweight from neutral, despite high valuations. He is optimistic on a shift in market sentiment back to neutral, with the Street consensus targeting an 8.2% gain for the S&P 500 to 2,959 by year's end.

“The U.S. growth outlook remains strong given attractive lending standards, tax cuts, and a fiscal spending stimulus that carries well into 2019,” wrote Citi. “Notwithstanding protectionist concerns, the underlying dynamics support earnings, which in turn should help equities.”

Levkovich's group sees 15% upside in earnings per share (EPS) in 2018 for the S&P 500. Strategists are overweight on energy, materials, industrials, health care and financials in the U.S. and underweight on technology, utilities, telecommunications and discretionary stocks. 

In February, Citigroup expects the market to enter "Phase 3" of the "Credit/Equity clock," writing that "this is the last part of a bull market" and that "all great stock market bubbles of the past 30 years have inflated during this phase in the cycle." Names like Netflix Inc. (NFLX) and Amazon.com Inc. (AMZN), which have become very expensive, will only see their values inflate over this period, according to analysts, as "market leadership typically narrows into growth and momentum trades." (See also: 10 Worst-Performing S&P 500 Stocks So Far in 2018.)

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