US Equity Strategy: Framing the Growth Narrative

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US Equity Strategy: Framing the Growth Narrative

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17 Jul 2026 16:36:21 ET │ 18 pages

US Equity Strategy

Framing the Growth Narrative

CITI'S TAKE

Scott T Chronert AC

This note updates and refreshes our work on “clusters” as a better approach +1-415-951-1771

to large-cap positioning than the Mag 7 and other style considerations. The scott.t.chronert@citi.com

Growth cluster comprises 55% of S&P 500 capitalization and nearly 48% of

earnings. It will also contain a good representation of stocks most directly Patrick Galvin, CFA

influenced by AI tailwinds (albeit to the positive and negative). There are +1-212-816-5373

many implications to the scale up in the Growth cluster over the past 30 patrick.galvin@citi.com

years. Macros matter less, realized volatility should be persistently higher,

and historical index level valuation comparisons need an asterisk.

Interestingly, Growth cluster valuations are lower vs history than are those

for Cyclicals and Defensives.

A New Framework for Large-Cap Positioning — We believe the “Mag 7” construct

is no longer relevant for assessing large-cap growth dynamics. We advocate for our

“cluster” approach, which segments the S&P 500 into Growth, Cyclicals, and

Defensives. We believe this framework more comprehensively captures the AI

infrastructure buildout and its enablers. Further, it allows for clearer attribution of

index performance and fundamentals, making it superior to the outdated “Mag X”

versus rest-of-index discussion, in our view.

Growth Cluster Drives Index Performance — The Growth cluster is the dominant

driver of S&P 500 earnings and returns. This cluster now represents 55% of the

index's capitalization and contributes nearly 48% of its earnings. Analysts model