Citi sticks to its bullish view on U.S. stocks despite ’challenging’ environment

Published 02/04/2025, 13:18
© Reuters.

Investing.com -- Citi Research remains bullish on U.S. equities despite the market environment being challenging, the bank said in a note Wednesday. 

According to the firm’s latest 2025 outlook, while the start of the year has been volatile, their positive view on U.S. stocks remains intact. 

Citi had anticipated early-year volatility, which has now materialized, driven by a combination of soft landing prospects, artificial intelligence (AI) spending, policy concerns, and evolving tech disruptions.

Citi’s base, bull, and bear case assumptions for U.S. equities remain consistent, offering a framework for navigating current market conditions. 

In particular, Citi highlights the importance of “positive Growth price action” for higher index levels, with a continued broadening of stock market leadership beyond mega-cap growth stocks. 

"Earnings growth convergence supports broadening," Citi stated, emphasizing the need for increased participation from smaller-cap stocks and value sectors.

The analysts also underscore the importance of earnings growth and productivity in the current environment. 

"Productivity improvement remains critical to fundamentals and valuation," Citi noted, indicating that operating leverage and earnings growth will be key drivers for stock performance, particularly given the current valuation landscape.

Citi’s outlook also factors in a “new Fed normal,” with expectations of a higher rate backdrop, which has not proven detrimental to U.S. equities historically. 

The firm believes that the U.S. economy and stock market are evolving out of the pandemic-induced recession, with Trump and Fed policies only having a marginal impact on underlying fundamentals.

Despite the anticipated higher volatility in 2025, Citi sees thematic tailwinds, such as AI and policy developments, as opportunities to identify tactical alpha across sectors and individual stocks.

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.