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Citi: Fed Rate Hikes Won't End Bull Market
16 Sep
Summary
- Global equities tend to climb months after rate hike start.
- US equities often underperform; Japan, Europe lead.
- Investors should favor value and cyclical stocks.
As central banks globally tighten monetary policy, including an anticipated Federal Reserve rate hike, Citi analysts offer historical insights for investors. Despite initial market wobbles around the start of rate hikes, equities have historically recovered and climbed within a year. The firm noted that volatility near the first rate move has often presented buying opportunities, especially when viewed over a one-year horizon.
Citi's analysis also highlights regional performance trends, indicating that the U.S. market has consistently underperformed compared to Japan and Europe. Emerging markets may see Brazil and India leading gains, while China lags. Consequently, the bank recommends a strategy leaning into value stocks and, to a lesser extent, cyclicals, aligning with these regional shifts.
While acknowledging short-term caution due to stagflationary risks from geopolitical events, Citi reiterates a positive outlook for global equities. The firm foresees earnings-driven gains extending into mid-2027, suggesting a robust long-term growth trajectory for the market.
