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 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 in 2025. Despite these concerns, the U.S. economy is expected to outperform, with Citi analysts highlighting a preference for U.S. small caps and sectors like tech and banks that may benefit from potential deregulation. The Federal Reserve's potential delay in rate cuts until May to manage inflation risks adds another layer of complexity to the market dynamics.
The ProShares UltraPro S&P 500 (UPRO) ETF has responded positively, rising 2.25% to $92.59 as of 10:00 AM on Friday, January 17.