Citigroup strategists anticipate a positive trajectory for global equities in 2024 as central banks initiate interest rate cuts.
Their projections envision the MSCI ACWI Local Index reaching 930 by year-end, indicating an over 8% increase from current levels.
The target assumes no re-rating from the present forward price-to-earnings ratio of 17 times, which the strategists consider conservative during a Federal Reserve easing cycle historically marked by market re-rating, according to the strategists.
While recommending the buying of dips, the strategists advise against chasing rallies based on their Bear Market Checklist.
Citi estimates flat global earnings-per-share growth in 2023, with an improvement expected in 2024, reflecting a 9% rise, slightly below consensus. The strategists anticipate a broader EPS growth scenario supporting varied stock performance, favoring cyclical markets and sectors.
They are overweight on Europe ex-UK and emerging markets, neutral on the U.S. and Japan, and underweight on Australia and the UK.
With a cyclical tilt, they upgrade global financials stocks to overweight, replacing materials as the preferred value cyclical option.
Moreover, the strategists suggest European metals and mining as a top pick to benefit from potential China stimulus and introduce some defensiveness by upgrading health care to overweight, while raising consumer discretionary to neutral.