As the U.S. gears up for the presidential inauguration on January 20, 2025, Citi's recent downgrade of its equity outlook for the S&P 500 has caught investors' attention. The downgrade, from +2 to +1, is attributed to rising tariff uncertainties and potential inflationary pressures. Citi's Global Asset Allocation report suggests that while the U.S. economy is expected to outperform, the risk/reward profile for equities is less favorable compared to 2024. Analysts highlight the potential impact of broad tariffs on global growth and inflation, noting that the Federal Reserve may delay rate cuts until May to manage these risks. Despite these concerns, Citi remains optimistic about U.S. small caps and sectors like tech and banks, which could benefit from potential deregulation.
The iShares Core S&P 500 ETF (IVV) has seen a modest increase, rising 0.76% to $599.16 as of 10:00 AM on Friday, January 17.