Citigroup Sees Equities Rally Continuing into 2025

(Reuters) – Citigroup (NYSE:C) stated on Friday that a rally in global equities is expected to extend into 2025, supported by falling interest rates and easing inflation, which could bolster corporate earnings.

The Wall Street brokerage projected that the MSCI All Country World Index Local, a key marker of global stock performance, would reach 1,140 points by the close of this year, indicating a 10% increase from its last close at 1,035.46.

Citi anticipates a 10% growth in earnings per share (EPS) for global equities, slightly below the analyst consensus of 13%. They expect the U.S. and emerging markets to see the strongest EPS growth at around 15%.

Reaffirming its “overweight” position on U.S. equities, Citi highlighted that President-elect Donald Trump’s policies present “a key source of uncertainty,” as tariffs, tax cuts, and deregulation could lead to a blend of favorable and adverse economic impacts.

The U.S. benchmark S&P 500 index surged 24% in 2024, driven by growth expectations linked to artificial intelligence, anticipated rate cuts from the U.S. Federal Reserve, and the potential for deregulation measures from the incoming Trump administration.

“Although AI is not expected to provide as significant an EPS growth advantage compared to the rest of the index, continued strength in the USD and policy uncertainty on tariffs could prolong its outperformance,” Citi analysts remarked.

Regarding other regional equity markets, Citi maintains a “neutral” outlook on emerging markets, an “underweight” on Australia and Japan, and an “overweight” position on Continental Europe.

In terms of global sectors, the brokerage upgraded its rating on healthcare to “overweight,” consumer staples and materials to “neutral,” and downgraded consumer discretionary, utilities, and industrials to “underweight.”