Equity markets are setting new records, yet not everyone feels they are being invited to the party. A handful of technology giants have powered indices higher this year, but Citi thinks the next leg of the rally could finally start to spread out.
Its latest global equity strategy keeps a mildly upbeat tone. The bank’s analysts remain “constructive” on shares worldwide, expecting around 5% upside by the middle of next year.
They believe there is room for markets to broaden, with cyclical sectors and lagging regions beginning to catch up. That means a tilt towards Europe excluding the UK, emerging markets and financial stocks.
Citi’s optimism rests on the earnings outlook. Consensus forecasts point to global earnings per share growth of 13% in 2026, compared with an estimated 9% this year.
All major regions and sectors are expected to contribute positively. The backdrop is not without its clouds, as investors weigh the drag from trade tariffs and a softening US labour market against the boost from lower interest rates and ongoing excitement over artificial intelligence.
The problem is valuation. The MSCI All Country World Index now trades at the 92nd percentile of its historical price-to-earnings range, a level that leaves little room for disappointment.
Citi warns that if earnings growth fails to meet expectations, stretched valuations could limit future gains.
For now, though, the tone remains confident. Interest rate cuts from the US Federal Reserve and solid earnings trends provide support, even if the easy money has already been made.
The hope is that leadership in markets, long dominated by a small set of mega-cap technology names, will begin to rotate towards more cyclical and value-driven areas.
Citi’s message is not one of exuberance, but of cautious continuity. After a long spell when investors chased the same few winners, the next phase of the rally might at last start to look a little broader.