Investing.com — Citi analysts outlined their equity strategy for the first quarter of 2025, emphasizing a more balanced approach amid changing macroeconomic conditions and policy uncertainty.
Their “SIGN (Sector & Industry Group Navigator)” outlines key areas of focus for investors as the year unfolds.
The strategy includes a combination of growth, cyclical and defensive play, adjusting to mixed signals in the economy.
Citi analysts warned that “Trump-related policy uncertainty during the first quarter” could add to market noise.
They suggest investors prioritize sectors with strong fundamentals, reasonable valuations and opportunities for margin improvement.
Citi recommends overweight positions in sectors such as healthcare, communications services and energy.
Health Care was moved to Overweight, with Pharmaceuticals and Biotechnology leading due to “right size” valuations and fundamentals closer to inflection.
Communications services remain a strong pick, supported by strong growth drivers in media and entertainment and attractive valuations in telecommunications.
Analysts are also bullish on semiconductors within the information technology space, citing the sector’s implied growth potential and ongoing margin expansion.
Conversely, Consumer Discretionary was downgraded to underweight.
“Expectations appear to be stretched relative to consensus estimates,” notes Citi.
Citi said banks remain its favorite cyclical overweight, benefiting from improved deposit growth and changing credit pricing trends.
Energy has been described as “the opposite of an overweight call,” with the potential for a re-rating as fiscal stimulus and infrastructure investment gather momentum.
On the defensive side, Food, Beverage & was upgraded to overweight, with fundamentals looking solid, “while the industrial group is trading near oversold levels.”
With potential tariff risks and geopolitical uncertainties on the horizon, Citi encourages investors to align sector views with stock picks. They are three overweight “Magnificent 7” stocks, Alphabet (NASDAQ: ), Meta (NASDAQ: ) and Nvidia (NASDAQ: ), market weight two, Microsoft (NASDAQ: ) and Amazon (NASDAQ: ), and underweight Apple ( NASDAQ:) and Tesla (NASDAQ:).
