Citi's recent downgrade of its equity outlook for the S&P 500, from +2 to +1, has introduced a cautious tone among investors as the U.S. approaches a new presidential inauguration. The downgrade is attributed to rising tariff uncertainties and potential inflationary pressures, which could lead to a choppier market environment in 2025. Despite the U.S. economy's expected outperformance, the risk/reward profile for equities appears less favorable compared to 2024. Citi's report suggests that while the U.S. might face less direct negative impact from tariffs, the Federal Reserve may delay rate cuts until May to manage inflation risks. This outlook has influenced market sentiment, with investors weighing the potential impacts on global growth and inflation.
The Direxion Daily S&P 500 Bull 2X Shares (SPUU) has responded positively, rising 1.73% to $152.87 as of 10:00 AM on Friday, January 17.