Citi Wealth Insights

With central banks rolling out unprecedented levels of monetary easing, interest rates are expected to stay lower for longer. Cyclical-oriented sectors in US Investment Grade corporates may benefit in a new economic cycle, while Emerging Market Debt offer compelling valuations.

The ECB boosted its PEPP and fully endorsed the recently proposed EU Recovery Fund. In Citi’s view, sentiment towards European assets is expected to improve.

The US Federal Reserve’s purchases of corporate bond ETFs alleviates liquidity concerns that created sharp price declines during March-April sell-off.

Driven by the collapse in demand for gasoline and jet fuel, the near-term outlook for oil pricing is poor. Prices may reflect continued distress on record declines in demand for transportation fuels. Citi analysts advise caution and selectivity when investing in the energy sector.

With markets likely to remain volatile, Citi analysts prefer to remain focused on building high quality fixed income portfolios.

Citi analysts believe there are benefits in keeping portfolio exposure to strong sovereign bond markets such as US Treasuries, while avoiding many others.