Citi analysts remain optimistic about the fundamental setup for the S&P 500 in the second half of 2024, despite lingering concerns about a potential recession.
In their recent note, Citi stated, "We remain constructive on the fundamental setup during the second half despite ongoing recession concerns."
They acknowledge that the pace of market gains may slow compared to the first half of the year but continue to see opportunities for further upside.
A key driver of the year-to-date index return has been the strong performance of Nvidia and other components of the so-called "Mag 7."
These companies have contributed a "disproportionate share" in the market's gains, underlining the importance of select sectors in driving overall market performance, according to Citi.
One of the main factors offsetting traditional macroeconomic worries has been the surge in generative AI investment spending.
The investment bank says this trend "has exerted as a significant offset to more traditional macro concerns," providing a cushion against broader economic uncertainties.
Looking ahead to 2025, Citi remains constructive but urges caution, noting that "fundamental follow-through into 2025 should continue, although the current consensus for next year appears aggressive."
This suggests that while the underlying fundamentals are strong, market expectations may need to be tempered as we move into the next year.
Overall, Citi's outlook for the remainder of 2024 remains positive, with a focus on the ongoing impact of AI investments and the potential for continued, albeit moderated, market gains.