Citigroup (NYSE:C) downgraded its outlook on U.S. equities Monday, citing elevated valuations and rising earnings dangers as commerce tensions escalate. The financial institution shifted its view from obese to impartial, pointing to indicators that the U.S. financial and earnings edge could also be waning.
The drivers of U.S. exceptionalism are fading, each by way of GDP and company income, analysts led by Beata Manthey wrote. They famous that present and proposed tariffs pose the best menace to U.S. earnings per share amongst world markets.
In accordance with Citi, broader structural shifts are additionally placing stress on U.S. fairness dominance, together with rising competitors from China’s DeepSeek AI mannequin and financial stimulus efforts in Europe. The agency noticed early indicators of capital rotation out of the U.S. and into worldwide markets, reversing years of robust inflows.
Regardless of recession considerations easing, the financial institution warned that dangers stay. The U.S. now faces among the steepest base tariffs in 100 years, with extra leviesincluding 10% broad tariffs and a 145% charge on Chinese language goodsstill anticipated to weigh on world development and raise U.S. inflation.
In distinction, Citi upgraded Japan to obese from underweight, citing its potential to keep away from the brunt of U.S. commerce measures. Europe stays obese, with regional shares considered as already reflecting the influence of 20% U.S. tariffs and providing comparatively interesting valuations.
Rising markets had been downgraded to underweight, as China continues to face disproportionate tariff publicity regardless of latest exemptions for know-how merchandise.
This text first appeared on GuruFocus.
