Source: Sharecast
The bank had downgraded equities from ‘overweight’ to ‘neutral’ in its last GAA and has been ‘underweight’ credit.
"We think this remains the right view. However, we had not fully implemented our view that US exceptionalism is at least pausing, but this has now become clearer," Citi said.
"Today, we therefore downgrade US equities to 'neutral', upgrade China to 'overweight', leaving equities overall 'neutral'." Citi had been ‘overweight’ US equities since October 2023.
"We are not convinced that US exceptionalism, when seen during the equity lens, is over," Citi said. "We think that it is only over structurally, when the AI story has peaked.
"We doubt that this is already happening. Having said that, the news flow from the US economy is likely to undershoot the rest of the world in coming months, and at least tactically, US exceptionalism is therefore unlikely to roar back."
Citi said China screens well, even after the rally.
"While tariffs remain a risk, we keep our 'underweight' in Japan, which may also be subject to tariffs and should offer some protection," it said. "There is also the possibility of reaching resolution in trade discussions with China, which would be very positive. The change leaves us overall still neutral on equities."