As the U.S. gears up for the upcoming presidential inauguration, market participants are closely monitoring the implications of Citi's recent downgrade of the S&P 500 outlook. The downgrade, from +2 to +1, reflects concerns over rising tariff uncertainties and potential inflationary pressures. Citi's Global Asset Allocation report suggests that while the U.S. economy is poised to outperform, the risk/reward profile for equities is less favorable compared to 2024. The report also notes that the Federal Reserve may delay rate cuts until May to manage inflation risks, adding another layer of complexity to the market dynamics. Despite these challenges, Citi remains optimistic about U.S. small caps and sectors like tech and banks, which are expected to benefit from potential deregulation.
The ProShares Ultra S&P500 (SSO) ETF has responded positively, rising 1.51% to $95.41 as of 10:00 AM on Friday, January 17.