Citi strategists shifted to a more defensive stance, downgrading U.S. stocks and global technology shares while upgrading European equities. According to Sina Finance, a team led by Beata Manthey cut U.S. stocks, global technology shares and European technology shares from overweight to neutral, citing crowded positioning, high valuations and slowing earnings-per-share growth. The team raised European equities excluding the U.K. from neutral to overweight, citing their lower reliance on technology and higher weightings in cyclical and defensive sectors.
Citi also upgraded materials and health care, while maintaining its preference for defensive, high-quality stocks. The report said cyclical sectors had underperformed defensive sectors during the latest market rotation.
Citi described the changes as tactical adjustments, not a bearish view on equities, and said resilient economic data and earnings could support markets. However, crowded positioning has only partly unwound, and markets could remain volatile in the short term until a more attractive buying opportunity emerges. The strategists also cited uncertainty about the outlook for AI investment as a source of potential near-term volatility.