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Citi Downgrades US Equities Amid Tech Slump
9 Nov
Summary
- Citi tactically downgraded U.S. equities and global tech.
- European stocks outside the U.K. were upgraded to Overweight.
- Investor positioning risks in Nasdaq could lead to further declines.
Citi has tactically downgraded U.S. equities and global technology sectors to Neutral from Overweight, anticipating that investor positioning may decline further. This strategic adjustment comes after a period of stability in indexes, which was followed by sharp sector rotations.
Technology has experienced the most significant downturn, but the volatility has now broadened across various sectors. Citi noted that AI sentiment has considerably weakened, partly due to midterm election results that cast uncertainty on future AI spending.
In contrast, Citi upgraded European stocks excluding the U.K. to Overweight. This move is attributed to the region's reduced reliance on technology and greater advantages derived from decreasing oil prices. The bank's sector strategy now balances cyclical and defensive stocks.
Citi also highlighted risks within the Nasdaq, suggesting that its positioning could shift from neutral towards net-short territory. They estimate an additional 5% drop would be necessary for positioning to become definitively negative. Despite these concerns, the bank views the overall investing environment as tenuous but with balanced risks rather than a significant downside skew.
