PULSE Monitor: Volatility Gets a Yellow Card

Research evidence excerpt

PULSE Monitor: Volatility Gets a Yellow Card

Our Stance on US Equities

We lift our base case year-end 2026 target for the S&P 500 to 8100. Citi Estimates vs. Consensus/Market Pricing

This is predicated on a big step up in earnings expectations where we

S&P 500 Price Target Citi Market Pricing *now project $350 and $400 for 2026/2027 index level earnings. We

allow for some multiple compression relative to our prior forecasts as Dec 2024 5882

the AI-triggered growth phase is clearly well underway. Our bull/bear Dec 2025 6846

cases imply increasing downside skew risk as the index works higher Dec 2026 E 8100 7668

(US Equity Strategy - Earnings Strength Drives Target Revision).

S&P 500 EPS (TTM) Citi Consensus **Our Q3 sector recommendations shift back to broadening. Strength in

the AI trade has been front and center, but tactically, we are taking this Dec 2024 246

opportunity to reduce our Info Tech recommendation to Market Dec 2025 276

Weight. We favor cyclical broadening via Consumer Discretionary, Dec 2026 E 350 343

Industrials, and Materials Overweight calls. Defensives are generally Dec 2027 E 400 400

Underweight given the absence of recessionary conditions, specifically

Consumer Staples. Communication is also Underweight (US Equity

Strategy - SIGN (Sector & Industry Group Navigator): Back to

Broadening).

Market action is starting to feel narrower again. Price momentum has Major US Index Performance, 1 Year (Rebased to 100)

been a focus because of strong relative performance. However, we are 150

uncomfortable with the factor given an increasing volatility. Therefore,

we suggest taking profit in price momentum to refocus on areas that 140

also have strong fundamental trends. Thematically, this leads us to our 130