Citi's view adds to growing optimism toward European stocks.
The Fed on Wednesday is set to raise its key rate by 50 basis points to a range of 4% to 4.5%, the highest since 2007.
Current prices are “too optimistic,” the bank's strategists wrote.
The strategists estimate the S&P 500 will end 2023 at 4,000 index points -- just 0.9% higher than Friday's close.
Strategist Michael Wilson and his team said short-term volatility should be expected ahead of the midterm results.
Bank of America's strategists say they don't expect the Fed to pivot anytime soon.
Analysts have reduced their average projections for profit at emerging-market companies by almost 16% this year.
Indicators including the inversion of the yield curve between 10-year and three-month Treasurys support a Fed pivot.
Michael Wilson, one of Wall Street's most vocal bears, still sees a short-term rally ahead.
Fund managers say stocks should bottom in 2023's first half as the Fed stops its rate hikes.
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