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Citi Wealth Insights

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Assessing the Pullback in the Technology Sector

The technology sector is seeing some pressure after a rally that has surpassed expectations. COVID-19 cyclicals were more resilient, consistent with Citi analysts’ preference of rotating from growth to value stocks amid a cyclical recovery. Looking ahead, Citi analysts believe this is more likely a correction rather than the start of a broader downturn, as the cyclical recovery remains intact. Nevertheless, further volatility is expected due to the upcoming US Presidential election and ongoing pandemic. With US equity valuations at a historic high relative to others, investors could also look to diversify into non-US markets.
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China’s IT Software Spending Remains Strong

Although COVID-19 may have had an impact, overall IT spending plans are expected to grow, with software getting more funds, while hardware and services less.
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Is This Another “Dot Com” Bubble?

The ten most valuable stocks in the S&P 500 and the Russell 1000 benchmarks now account for 30% and 26% respectively of these market indices and the five largest have reached a record high share for modern times. However, Citi analysts believe this is not a “Dot Com” repeat.
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An Aging China: Turning Adversity into Opportunity

China’s old age population share is likely to double from 12.6% to 26% in 2050 with total population likely peaking in the late 2020s then declining. From an equity strategy perspective, the aging population is like to lead to more divergent performance among sectors. In particular, healthcare, internet, consumer discretionary and insurance may benefit.
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Adding Allocation to Real Estate Investment Trusts (REITs)

Citi’s Global Investment Committee (GIC) added a thematic allocation to Real Estate Investment Trusts (REITs).
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Divergence in European Countries, Sectors and Companies

Citi’s Global Investment Committee has reduced allocation to European and emerging EMEA equities from neutral to underweight. Within the region, much performance dispersion is expected between countries, sectors and companies.
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