Street Calls of the Week
Investing.com -- The equity bull market may be entering a more volatile phase, according to Citi strategists led by Beata Manthey.
The team points to renewed US-China trade tensions as a key concern, noting that stakes are high and the path to resolution appears complex.
As the global reporting season accelerates, earnings per share (EPS) upgrades versus bottom-up consensus are now priced into most major markets, the strategists said.
They believe European companies face a lower bar to meet or beat expectations compared to their US counterparts. The bank highlighted that internationally-exposed sectors in Europe have experienced significant EPS downgrades year-to-date and have substantially underperformed their more domestically-focused peers.
A primary concern for Citi is that stretched valuations could limit future market gains if earnings fail to deliver. Despite these challenges, the strategists maintain a constructive outlook, projecting approximately 5% upside for European equities through mid-2026 as EPS growth becomes more widespread.
Citi’s sector preferences include overweight positions in technology and banks, with healthcare as their favored defensive sector. The bank remains underweight on cyclical sectors with weak earnings momentum, particularly automobiles.
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