Citi Downgrades U.S. Stocks, Upgrades Chinese Equities
Citi has downgraded its recommendation for U.S. stocks from “buy” to “neutral,” aligning with the view that American exceptionalism is at least on pause—suggesting that the U.S. economy may no longer consistently outperform others.
Two recent price signals contributed to this shift in outlook: the S&P 500 falling below its 200-day moving average and the weak performance of market-leading stocks. In yesterday’s session, the S&P 500 dropped 2.7%, marking its largest daily decline of the year, while the Nasdaq plunged 4%, its worst single-day loss since September 2022.
At the same time, Citi upgraded its recommendation for Chinese stocks from “neutral” to “buy.” “China is delivering strong results,” despite ongoing tariff risks, the bank’s economists noted. They also highlighted the possibility of a resolution in trade discussions with China, which would be a highly positive development.
The Case for China’s Tech Sector
Citi economists emphasized that the arguments in favor of China’s tech sector are clear. They pointed to DeepSeek as evidence that Chinese technology remains at the cutting edge—or even beyond—Western technological frontiers, despite export controls. Tencent and Alibaba’s advancements in AI further reinforce this position.
Additionally, while President Xi Jinping’s support for the tech sector came later than expected, it has now materialized. Chinese tech stocks also remain relatively cheap compared to other global AI assets, even after their recent rally.
Finally, Citi revised its forecast for China’s GDP growth from 4.5% to 4.7% for this year, partly due to increased investment in AI. The fiscal targets and the ambitious 5% economic growth projection presented at the National People’s Congress were in line with expectations, the bank added.
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