Citigroup has flagged European equities as its preference for the second half of the year, following six months of “extraordinary” macro shocks worldwide.
In its latest Global Equity Quarterly note, called The Next Chapter, the Wall Street bank said: “The first half for 2025 has been shaped by extraordinary macro shocks, but global equities have nevertheless climbed back towards all-time highs.
“Heading into the second half, the market set-up feels somewhat familiar. While tariff risks remain in place, global equities are pricing in relatively optimistic EPS outcomes – and many of our conversations focus on the potential return of US equity market ‘exceptionalism’.”
It forecast rangebound markets to the year end, and upside of around 5% for the MSCI All Country World Index to mid-2026.
“This will be supported by below-consensus, but still solid, EPS growth…and little change in valuation multiples,” it noted.
Citi maintained its preference for European equities in the global context and remained ‘overweight’ on the global tech sector, although utilities is its preferred defensive sector.
In contrast, it is ‘underweight’ in emerging markets and Australian equities, and in global consumer sectors.
Japan was downgraded to ‘neutral’ on near-term risks from tariffs and the strength of the Japanese yen. Its ‘neutral’ stance on the US was also reiterated.