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Citi

Citi Wealth Insights

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Modest lift in risk sentiment as Trump – Xi decide to renew trade talks; ECB President Draghi points to further ECB easing soon

On any other day, USTR Rob Lighthizer’s appearance before Congress may be the biggest source of trade headlines as he testifies before the Senate Committee overnight but it is Trump’s tweet about his telephone conversation with President Xi to have an extended meeting next week at the G-20 that modestly lifts risk sentiment with the 2 negotiating teams expected to begin talks prior to their meeting.
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Risks Remain Elevated

Political and policy uncertainty affecting trade, sanctions and regulation is generating increased levels of investor concern, with impact on the global economy and financial markets.
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Uncertainty could see Safe haven Currencies in Vogue

The extension of the US-China trade dispute together with other unresolved geopolitical concerns – Brexit, a potentially more populist European parliament and US-EU/ Japan trade tensions risk posing headwinds to the 2H19 outlook. This is likely to support safe haven currencies.
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Pockets of Opportunities

Citi analysts believe that oil can outperform other commodities even if trade tensions were to escalate. This is because supply-side factors can be far more influential than demand changes.
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Protect the Downside

Amid a revival of trade fears, Citi’s overweight stance on fixed-income quality may help navigate more volatile mid-year markets and potentially strengthening risk-adjusted returns.
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Exploiting Late Cycle Opportunities

Financial markets weakened over the course of May as investors came to see a lower probability of a quick resolution of trade disputes. In light of trade fears revival, Citi analysts have scaled back on risk allocations by tactically reducing global equities to underweight.
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