Citi's Scott Chronert on Driving 2026 Earnings Growth: AI, MAG7, and Sector Broadening

Market Outlook: Boom Phase

• 💡 Citi Research views the current market as being in a boom phase, rather than a bubble, reflecting a more optimistic outlook.
• 🚀 The strategy anticipates a constructive underlying fundamental setup for the upcoming year, with high-end earnings expectations.

Earnings Expectations for 2026

• 🎯 Citi Research has set high-end consensus earnings expectations at $320 for next year, feeling confident about this target.
• 📈 The outlook assumes continued beat and raise performance from the MAG7/Elite 8 cohort, which is crucial for index-level earnings.

Drivers of Earnings Growth

• ⚡ The primary driver is the MAG7/Elite 8 AI enabler cohort, which constitutes a significant portion of market cap and earnings growth.
• 🧩 A secondary driver is the expected broadening of earnings growth into other sectors that have underperformed.

Underperforming Sectors

• ⚠️ Sectors such as energy, materials, REITs, and utilities have contributed negatively to underlying index earnings growth this year.
• 📈 The expectation is for these sectors to begin contributing positively, adding to the overall constructive earnings picture.