Under the shadow of volatility, has the style of U.S. stocks changed dramatically? Citigroup declares: The growth theme will "steadily hold the C position" in 2025
Citigroup released a report stating that despite risks such as high interest rates and doubts about AI investments, growth themes will still lead the U.S. stock market in 2025. Despite market volatility, growth stocks have outperformed value stocks, and Citigroup's thematic investment portfolio has performed well. Citigroup advises investors to balance allocations among growth, cyclical, and defensive themes, and to remain patient amid market uncertainty, focusing on incremental alpha opportunities
According to the Zhitong Finance APP, Citigroup has released a thematic investment strategy report for the U.S. stock market, emphasizing that despite various risks facing the market, growth themes continue to perform strongly. Citigroup highlights that growth themes will continue to lead the market into 2025.
Citigroup stated that due to high interest rates, skepticism surrounding massive investments in artificial intelligence (AI), and tariff issues, the U.S. stock market experienced considerable volatility in January. However, overall, U.S. stock indices still saw a slight increase.
On the surface, these risks seem to have indeed led to a shift in stock market styles. The Nasdaq 100 index has lagged behind the S&P 500 index, while the Russell 1000 index is leading growth stocks. However, upon closer examination of market behavior at the stock and thematic levels, Citigroup found that growth stocks are actually performing well. On an equal-weighted basis, U.S. growth stocks have outperformed value stocks, and growth themes have outperformed cyclical and defensive themes. The performance of market-cap-weighted indices varies due to the influence of the seven major tech giants.
Due to macroeconomic and policy uncertainties, Citigroup expects market volatility to persist in the first quarter and even the first half of this year. To cope with market fluctuations, Citigroup advocates for a balanced allocation, combining growth themes with cyclical and defensive themes.
Despite market volatility, Citigroup's thematic investment portfolio (Thematic 30) has performed well overall. Citigroup has adjusted the thematic portfolio by replacing Edison International (EIX.US) with Republic Services (RSG.US). Citigroup believes that Republic Services is expected to improve its ROE over the next two years, and its low market beta is advantageous for coping with ongoing market volatility. Although Edison International suffered losses in the Los Angeles wildfires, Citigroup still maintains a "buy" rating on the stock.
Citigroup's recommended thematic stock list
Overall, Citigroup advises investors to maintain a balanced allocation to growth, cyclical, and defensive themes to cope with various risks in the first half of the year. Citigroup also recommends that investors remain patient until market conditions clarify, focusing on incremental alpha opportunities rather than pursuing a more diversified investment style