Investing.com -- Citi strategists project another positive year for global stocks in 2025, forecasting a potential upside of 10% for the MSCI All-Country World Equity Index.
The projection is largely driven by anticipated earnings growth, with the index’s 12-month forward price-to-earnings (PE) ratio expected to remain near its current level of approximately 18x.
According to Citi’s Friday note, earnings per share (EPS) growth is set to play a central role, with the bank’s top-down models predicting 10% global EPS expansion, slightly below the 13% consensus among analysts.
Notably, the strongest growth is expected in the US and emerging markets, with both regions projected to achieve approximately 15% EPS increases.
“Earnings should “broaden” somewhat in the year ahead; all regions and global sectors are expected to see EPS expand, while dispersion in growth outcomes should be smaller than in 24E,” strategists led by Beata Manthey said in the report.
“Within the US market, the wide gap in EPS growth between the Mag 7 and other index members should narrow to single digits,” they added.
From a macro standpoint, Citi anticipates near-trend global growth in the coming year, supported by declining inflation and ongoing central bank easing. It highlights that Trump policies remain a key source of uncertainty, creating a "complicated mix of favorable and adverse economic effects."
Despite this, the macro outlook is seen as favorable for corporate earnings growth and equity market gains.
“While an environment of solid growth and rate cuts would typically favor more Cyclical ex-US markets, we think US exceptionalism could continue over the near-term,” strategists said.
Greater clarity on Trump policies, particularly around tariff negotiations, alongside sustained dollar weakness, could drive outperformance in the rest of the world (RoW) markets, they added.
Strategists expect global equity returns for the full year to be distributed more evenly across regions, although the broader market trends may take longer to materialize, potentially after the post-inauguration period.
Despite rich multiples in markets like the US, other regions, including Europe and Japan, offer relatively attractive valuation setups.
“Citi regional equity strategists’ market targets see the most upside in Japan and Europe,” the note states.
Manthey’s team maintains a barbell approach. The US remains a core Overweight, which benefits especially from Trump’s policies, in addition to its Quality tilt and AI leadership.
Citi also recently upgraded Continental Europe to Overweight, highlighting the region as “the best diversifier for one-way, US-centric positioning.” The Wall Street firm remains Underweight Japan and Australia.
The bank’s global sector strategy is similarly balanced, with the firm upgrading Health Care to Overweight, aligning it with Communication Services and Financials. In contrast, they have downgraded Consumer Discretionary, Utilities, and Industrials to Underweight.