April 14 - Citigroup has repositioned its recommendation on U.S. equities, moving to an "Overweight" stance from a prior "Neutral" rating in a note released late Monday. The shift reflects a combination of recent index gains, more attractive relative valuations following market pullbacks, and a trend in which U.S. technology companies are accounting for a growing share of global earnings growth.
The brokerage highlighted that the benchmark S&P 500 has recovered almost 9% from a seven-month trough hit in late March, a rebound supported by hopes that the conflict in the Middle East could subside and thereby reduce the risk of an oil-driven inflation shock. Several other large research groups have expressed similar positioning favoring U.S. shares over international peers, underscoring a broader industry tilt toward American markets.
In its analysis, Citi strategists noted that the U.S. market has derated and currently trades at a premium versus developed markets excluding the U.S. - a gap that is near historical norms. At the same time, the firm pointed out that global earnings growth is narrowing and concentrating more heavily in the technology sector. Citi estimates that about half of the expected rise in earnings per share in 2026 will be attributable to tech alone, even as all global sectors are projected to post EPS gains that year.
On emerging markets, Citi took a more cautious line, downgrading EM equities to a "Neutral" rating. The brokerage warned that many emerging economies remain highly exposed to physical energy shortages, vulnerabilities that could be exacerbated by continued dollar strength. The war involving Iran has put renewed pressure on emerging market assets by lifting oil prices, which in turn raises concerns about inflation, worsening external balances and potential capital outflows in energy-importing nations. The MSCI Emerging Markets index has fallen 2.8% since the conflict began, Citi noted.
Despite trimming its stance on EM equities, Citi raised its year-end target for the MSCI Emerging Markets index to 1,770 from an earlier 1,540. On the sector level, the bank upgraded the global materials sector to "Overweight," citing improving earnings momentum, stronger growth prospects and relatively low valuations. Conversely, it downgraded the global communication services sector to "Underweight."
Separately, an AI-driven stock selection service claims its flagship Tech Titans strategy doubled the S&P 500 within an 18-month span, citing winners including Super Micro Computer (+185%) and AppLovin (+157%).
Market implications
- U.S. equities - Citi now bullish, citing valuation and earnings drivers.
- Technology - Seen as the principal engine of global earnings growth into 2026.
- Emerging markets - Downgraded due to energy exposure and dollar-related headwinds.