U.S. stock rally will expand beyond technology, Citigroup Inc strategists say. whose outlook on the sector has become more cautious.
A team led by Scott Chronert reduced its stance on the technology sector to market weight from overweight following new underweight recommendation on hardware companies. They also raised consumer discretionary to overweight.
“The cyclical growth bar that we have defended for several months now allows a widening towards defensive parts of the market, particularly those that are more sensitive to interest rates,” Citi strategists wrote.
Within technology, strategists maintained an overweight in the software subsector and have a market weight in semiconductors. Among other sectors, they reduced the financial sector to its market weight for the second quarter.
The S&P 500 is already trading 3% above Citigroup's year-end target of 5,100″ reflecting a soft landing and enthusiasm for AIIn a separate note, Chronert noted that an indicator of the bank's investor sentiment has reached “euphoria,” a level that aligns with a lower likelihood of positive returns over the next year.
