Citi's recent downgrade of its equity outlook for the S&P 500, from +2 to +1, has introduced a cautious tone to the market as investors brace for potential inflationary pressures and tariff uncertainties. The report suggests that while the U.S. economy is poised to outperform, the risk/reward profile for equities is less favorable compared to 2024. This sentiment is compounded by the anticipation of a choppier market in 2025, with broad tariffs potentially impacting global growth and inflation. Despite these concerns, Citi remains optimistic about U.S. small caps and sectors like tech and banks, which could benefit from potential deregulation.
The Invesco S&P 500 Equal Weight ETF (RSP) has shown resilience, rising 0.52% to $180.10 as of 10:00 AM on Friday, January 17.