Citi analysts believe the delta variant wave of global COVID-19 infections is likely to slow the pace of global reopening rather than representing a shock to the global economy. While monetary policy is still supportive, Citi analysts expect policy stimulus to gradually diminish in the year ahead. However, a rebounding economy should more than offset the decline in macro policy support.
As such, forward-looking markets should generate moderating overall equity returns ahead. With positive but less robust return expectations, Citi analysts have shifted allocations within equity markets away from the riskiest firms toward those with stronger long-term prospects, higher-quality balance sheets, and a strong outlook for future dividend payments.
In the longer term, Citi analysts continue to favour “Unstoppable Trends” which are major, multi-year phenomena that have the potential to transform the world, with far-reaching implications for portfolios.