Citi's Dirk Willer on US Growth Slowdown and Global Market Outperformance

US Growth Slowdown and Market Correction

• 💡 Citi Research has downgraded US equities overall, not expecting a recession but a correction in the S&P 500.
• 📉 The expectation is that the S&P 500 will likely underperform the rest of the world over the next three months.

Positive Global Economic Signals

• 🇪🇺 Europe shows positive signs with a huge fiscal package from Germany and potential for a ceasefire in Ukraine.
• 🇨🇳 China has also provided positive news, particularly in the technology sector and through broad government support.
• 📈 Citi is upgrading growth estimates for Europe and China while downgrading them for the US.

Impact of Fiscal Stimulus

• 💰 The US spent proportionately more on COVID-19 stimulus, which significantly supported US consumer spending and growth initially.
• 📊 The impact of stimulus measures in China and Europe is noted as a key factor for growth differentials and market outperformance.

Long-Term US Market Potential

• 🚀 In the long run, the US is expected to rebound due to the quality of its companies and its leadership in the AI story.
• 🤖 AI is seen as a future market driver that will benefit both the US and China, but not Europe.

Tariffs and Global Market Dynamics

• ⚠️ Countries with significant tariffs on them (China, Europe, Mexico, Canada) are currently outperforming the S&P 500.
• ⚖️ This is a reversal from 2018, where only China underperformed; now, broad tariffs make it more difficult for the US economy to perform well.
• ⏳ The current underperformance of the US is viewed as a tactical call for the next 3-6 months, with US exceptionalism potentially returning later.