Citi: ’Uncertainty remains the buzzword’

Investing.com -- “Uncertainty” dominated investor sentiment at this year’s IMF and World Bank Spring Meetings, according to Citi analysts, who warned that growth downgrades and skepticism around U.S. fiscal policy are driving risk aversion across markets.

In a note to clients, Citi wrote, “Uncertainty remains the most overutilized buzzword,” pointing to the IMF’s decision to clarify that its latest forecasts are “reference” forecasts rather than baselines. 

That shift, Citi said, “has an asymmetric bias to the downside,” especially given the lack of clarity on how long uncertainty will persist.

The IMF cut its 2025 global growth forecast by 0.5 percentage points to 2.8%, with the U.S. seeing the steepest downgrade, down 0.9 points to 1.8%. 

Citi noted, “Most investors seem to be expecting a recession as a result of the tariff war and associated uncertainty.” Investors also questioned whether the U.S. government’s fiscal outlook relied too heavily on “aggressive growth estimates” and “overly optimistic cost-cutting.”

While the U.S. dollar remains under pressure, Citi cautioned against over-positioning for further weakness. 

“We would also note that negative sentiment with the US at the IMF has been extreme,” the analysts wrote, adding that pending trade deals with the U.K., India, and Saudi Arabia could help ease tariff concerns.

Outside the U.S., Citi observed limited enthusiasm in Europe for U.S.-led trade initiatives, particularly due to concerns over China. 

Meanwhile, the bank said Japan may be forced to revise its economic outlook following “Liberation Day” reforms.

Emerging and frontier markets face their own constraints, with Citi noting, “Frontier EM countries came into this global trade shock with still very elevated levels of debt,” and central banks are showing reluctance to “overreact to the trade shock” with aggressive rate cuts.

Despite wide-ranging risks, Citi also stated, “We heard some cautious optimism on a framework agreement with Iran.”