Falling interest rates and easing inflation are poised to bolster corporate earnings, paving the way for a continued global equity rally into 2025, according to Citigroup. The Wall Street brokerage anticipates the MSCI All Country World Index Local, a key indicator of global stock performance, to reach 1,140 points by year-end, representing a 10% increase from its recent close of 1,035.46.
Table Content:
Projected Earnings Growth and Regional Outlooks
Citigroup projects a 10% earnings-per-share (EPS) growth for global equities, slightly below the 13% consensus among analysts. The firm highlights the U.S. and emerging markets as potential leaders in EPS growth, forecasting approximately 15% for both regions. While maintaining an “overweight” rating on U.S. equities, Citi acknowledges the uncertainties surrounding the incoming presidential administration’s policies on tariffs, tax cuts, and deregulation.
2024 Performance and the Impact of AI
The U.S. benchmark S&P 500 index experienced a substantial 24% surge in 2024, driven by growth expectations linked to artificial intelligence (AI), anticipated interest rate reductions by the Federal Reserve, and the prospect of deregulation under the new administration. Although AI’s contribution to EPS growth might moderate, continued U.S. dollar strength and policy uncertainties related to tariffs could further fuel its outperformance, according to Citi analysts.
Regional and Sectoral Recommendations
Beyond the U.S., Citigroup maintains a “neutral” stance on emerging markets, an “underweight” position on Australia and Japan, and an “overweight” rating on Continental Europe. In terms of global sectors, the brokerage upgraded healthcare to “overweight” and consumer staples and materials to “neutral.” Conversely, consumer discretionary, utilities, and industrials were downgraded to “underweight.”
Conclusion: A Positive Outlook for Global Equities
Citigroup’s analysis suggests a positive outlook for global equities, driven by anticipated declines in interest rates and inflation. These factors are expected to contribute to sustained corporate earnings growth, extending the current market rally into 2025. While policy uncertainties remain, particularly in the U.S., the firm’s projections point to continued opportunities for investors in specific regions and sectors. Further developments in AI and global economic conditions will be key factors to watch in the coming year.
