Citi’s Manthey Sees Global Stock Gains Slowing Over Next Year

Citigroup strategists, led by Beata Manthey, forecast a significant deceleration in global equity gains, projecting the MSCI All-Country World Local Index will see minimal further upside this year before advancing just 5% to 1,150 points through mid-2026. This outlook represents less than half the 12% gain observed since July 2024, driven by concerns that current earnings expectations are overly optimistic given a 'highly uncertain' economic environment.

Analysis

Citigroup strategists, led by Beata Manthey, have issued a cautious forecast for global equities, anticipating a significant deceleration in performance over the next year. The team projects the MSCI All-Country World Local Index will experience minimal further gains through the end of the current year, followed by a modest 5% climb to 1,150 points by mid-2026. This outlook stands in stark contrast to the index's recent 12% advance since July 2024, representing a more than halving of the pace of gains. The primary rationale for this tempered view is a perceived disconnect between what they consider 'relatively optimistic' earnings expectations and a 'highly uncertain' macroeconomic outlook, suggesting a potential for downward revisions to corporate profit forecasts.

Key Decisions for Investors

• Investors should consider tempering their return expectations for broad global equity indices, as the forecast suggests a shift from strong, market-wide gains to a more muted and potentially volatile environment.
• Given the concern over optimistic earnings, it is prudent to re-evaluate portfolio holdings for earnings resilience and realistic forward guidance, potentially favoring companies with stronger balance sheets and less cyclical demand.
• The projected slowdown warrants a review of asset allocation, possibly reducing exposure to high-beta or momentum-driven segments in favor of more defensive positioning until the 'highly uncertain' outlook gains more clarity.