Citi Wealth CIO Kate Moore on Market Outlook, Earnings Growth, and Interest Rates

Market Performance and Investor Sentiment

• 🚀 The market has seen a staggering 30% rally since the April lows, a move that is nearly unprecedented.
• 💡 While acknowledging risks, Citi Wealth has remained invested, particularly in the large-cap rally, and has seen strong year-to-date performance.
• ⚠️ Investors are showing increased caution heading into the fall due to the strong recent run, with expectations of some consolidation.
• ✅ The majority sentiment, including from Citi Wealth, is that the market will end the year higher.

Earnings Growth Projections

• 📈 Kate Moore expects high single-digit earnings growth for the full year 2025.
• 🎯 This growth is anticipated to continue into 2026, even with potential economic slowdowns.
• 📊 US corporate management teams are expected to continue managing margins and delivering on the bottom line, as seen in Q2.

Interest Rates and Multiple Expansion

• 💰 Interest rates are seen as a key factor influencing multiple expansion.
• 📉 Citi Wealth anticipates a rate cut in September, with further cuts less certain and a potential Fed pause to evaluate data.
• 📊 There's a cautious outlook on expecting a rate cut at every meeting until mid-2026, as the Fed is likely to pause and evaluate.
• 🧩 Multiple expansion will likely be sector-specific, with potential gains in rates-sensitive areas and AI/tech if new innovations drive productivity.

Tariffs and Market Certainty

• ⚖️ The market desires certainty regarding tariffs, allowing for better modeling and forward planning.
• 📉 While initial reactions to tariffs caused panic, current sentiment suggests a fading of worst-case scenarios.
• ⚠️ Analysts and corporate management are being careful with margins due to uncertainty in projecting cost bases.
• ✅ Court rulings against presidential tariff actions are viewed as a positive check and balance, removing extreme negative scenarios from market pricing.

Broader Economic Outlook

• 🔍 While specific S&P price targets are difficult to forecast, a couple of percentage points increase by year-end is considered reasonable.
• 🔮 Forecasting further out, such as to the end of 2026, is highly challenging due to numerous variables.