Stock markets will suffer a case of déjà vu this year, with a strong start expected to lose traction by the end of 2008, Tobias Levkovich, chief equities strategist at Citigroup Global Markets in New York says.

In his 2008 strategy outlook, Mr. Levkovich said there was greater potential for meaningful gains in the first half because the market would likely face a number of pressures toward the end of the year, such as a probable deterioration in margins, presidential election uncertainty, and growing economic nationalism.

Citigroup forecasts the S&P 500 to end 2008 at 1,675 and the Dow Jones Industrial Average to sit at 15,100.

Mr. Levkovich said current growth estimates across the board were too high, with the possible exception of the health care sector.

“Indeed the market’s difficulties over the past two months provide ample anecdotal evidence that the investment community is skeptical of these growth projections,” he said, adding that a client survey found the bulk of investors expect mid-single digit earnings per share growth in 2008, while a fair number expect outright earnings declines.

Mr. Levkovich recommends keeping a large-cap focus throughout the year, but not for the conventional reason of their having a greater international sales presence in a time of faster overseas economic growth, a softening U.S. dollar and more attractive price to earnings ratios.

He said:

The change in relative performance characteristics (of large-cap stocks) seems far more tied to the trends in earnings growth, consumer delinquencies, volatility and credit spreads rather than the conventional commentary, and it seems very difficult to build predictions that the four aforementioned conditions will change direction in the near term.

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