Investing.com – Citi analysts have laid out their equity strategy for the first quarter of 2025, emphasizing a more balanced approach amid evolving macroeconomic conditions and political uncertainties.
Its “SIGN (Sector & Industry Group Navigator)” outlines key areas of focus for investors as the year progresses.
The strategy incorporates a combination of growth, cyclical and defensive plays, adapting to mixed signals in the economy.
Citi analysts warn that “Trump-related political uncertainty during the first quarter” could amplify market noise.
They suggest that investors prioritize sectors with strong fundamentals, reasonable valuations, and margin improvement opportunities.
Citi recommends overweight positions in sectors such as healthcare, communication services and energy.
Healthcare moved to Overweight, with Pharmaceuticals and Biotech leading the way due to “adequate” valuations and fundamentals closer to inflection.
Communication services remain a good option, driven by strong growth drivers in media and entertainment and attractive valuations in telecommunications.
Analysts are also advocating for semiconductors within the information technology space, citing the sector’s implied growth potential and continued margin expansion.
In contrast, Consumer Discretionary has been downgraded to underweight.
“Expectations appear wide compared to consensus estimates,” notes Citi.
Citi said banks remain its favorite cyclical overweight, benefiting from improving deposit growth and loan repricing trends.
Energy is described as a “contrary to overweight call,” with rerating potential as fiscal stimulus and infrastructure investments gain momentum.
In defensive plays, Food, Beverages and has been upgraded to overweight, with the fundamental outlook appearing strong, “as the industry group trades near oversold levels.”
With potential tariff risks and geopolitical uncertainties on the horizon, Citi urges investors to align sector views with stock selection. They are overweight three of the “Magnificent 7” stocks, Alphabet (NASDAQ:), Meta (NASDAQ:) and Nvidia (NASDAQ:), market weight two, Microsoft (NASDAQ:) and Amazon (NASDAQ:), and underweight in Apple. (NASDAQ:) and Tesla (NASDAQ:).