Citi's Insight: Global Markets Expected to Stabilize Before Growth Surge

Citi's Global Market Predictions for 2024 and Beyond

Citi analysts are currently suggesting that global equities may see muted returns throughout 2024. This projection comes amid rising optimism surrounding a possible soft economic landing, bolstered by robust employment numbers from the U.S.

Risk Balance in Global Markets

In their recent analysis, Citi expressed their commitment to assessing both the potential upside and downside risks in global markets. Factors such as anticipated interest rate cuts, strong economic growth in the U.S., and stimulus measures from China could pave the way for future profitability. Nevertheless, several risks linger, including a possible slowdown in the U.S. economy, ongoing geopolitical tensions, and adjustments in corporate earnings forecasts.

Medium-Term Outlook

Looking further ahead, Citi's outlook appears more optimistic, predicting a 5% increase in the MSCI AC World Index by mid-2025. Their forecasts indicate a growth in global earnings per share (EPS), with projections of +10% for 2024 and +8% for 2025. While the firm's estimates for 2024 align closely with market consensus, their predictions for 2025 fall slightly short.

Regional Performance Expectations

According to Citi, there is anticipated positive EPS growth across all major regions in 2025, particularly in the U.S. and Europe. However, they caution against ongoing downgrades affecting these major markets.

Investment Recommendations by Citi

Citi highlighted a favorable outlook for cyclical stocks, advocating for an overweight position in U.S. and European securities, especially within communication services and financial sectors. Notably, they have upgraded the outlook for Europe excluding the UK due to its exposure to China, policy easing, and relatively appealing valuations.

Japan's Market Position

In contrast, Japan has been downgraded to an underweight position as a result of weak earnings momentum and a strong yen. The analysts explained that, although recent political fluctuations are unlikely to dramatically affect Japanese assets, the trend of frequent EPS upgrades in Japan is beginning to falter, partly due to JPY appreciation. There may also be a rotation of investments away from Japan influenced by the recent positive momentum in Chinese markets.

Citi's Balanced Approach to Stock Selection

In light of future market conditions, Citi encourages a balanced strategy that appreciates quality stocks while remaining open to cyclical opportunities. Despite current market hurdles, there is a sense of optimism toward growth in 2025 driven by progressive earnings and slight adjustments in valuations. Analysts at Citi believe that navigating through these changes will be crucial for investors seeking to position themselves effectively in this shifting landscape.

Frequently Asked Questions

What are Citi's predictions for global equity returns in 2024?

Citi predicts that global equities might experience flat or muted returns throughout 2024.

What factors could influence future market performance according to Citi?

Potential rate cuts, strong U.S. economic growth, and China's stimulus measures could promote future gains.

What is the expected EPS growth forecast for 2025?

Citi forecasts an EPS growth of +8% for 2025.

Which regions is Citi recommending investors focus on?

Citi recommends an overweight approach to U.S. and European stocks, particularly in cyclical sectors.

What is the outlook for the Japanese market?

Citi has downgraded Japan to an underweight position due to negative earnings momentum and currency strength.

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