Strategists at Citigroup, led by Beata Manthey, cautioned that the ongoing equity bull market may be heading into a choppier, more volatile stretch.
They pointed to renewed tensions between the U.S. and China as a major source of uncertainty, emphasizing that “stakes are high and the path to resolution appears complex.”
With earnings season picking up speed globally, Citi noted that much of the expected earnings per share (EPS) upgrades versus bottom-up forecasts have already been priced into most major markets.
The strategists said European companies may have an easier time meeting or beating earnings expectations compared to their U.S. counterparts. Internationally exposed sectors in Europe have seen steep EPS downgrades this year and have underperformed more domestically focused industries, leaving room for potential upside surprises.
One key risk, according to Citi, is that stretched valuations could cap future gains if earnings fail to follow through. Nevertheless, the bank remains moderately optimistic, forecasting around 5% upside for European equities through mid-2026 as EPS growth becomes more broadly distributed.
Citi continues to favor overweight positions in technology and banking, with healthcare as its preferred defensive sector. Conversely, it remains underweight on cyclical industries with weaker earnings momentum, particularly in the automotive space.
This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.
Some portions of this content may have been generated or assisted by artificial intelligence (AI) tools and been reviewed for accuracy and quality by our editorial team.