In the first quarter of 2024, many AI-led tech companies saw success, while some of the top performers experienced a decline. Due to uncertainty and a potential decrease from record highs, Citi has downgraded the tech sector from Overweight to Market Weight. They have also upgraded the consumer discretionary sector to Overweight, citing a shift in market gains.
Citi US Equity Strategist Scott Chronert discussed these sector changes with Yahoo Finance. He mentioned that the market is moving away from tech and cyclical leadership towards parts that may benefit from potential changes by the Federal Reserve. Consumer discretionary is expected to benefit from this shift.
Tesla and Apple have struggled this year, with Tesla’s shares dropping after missing first quarter delivery estimates. As tech loses its appeal, investors may want to consider consumer discretionary for growth potential. Citi is particularly bullish on the automotive industry within this sector.
Chronert explained that Citi had previously been underweight in autos but has now shifted to a more neutral stance. This change has also impacted other areas within consumer discretionary, making their overall view more positive.
Despite recent market fluctuations driven by strong economic data, Citi remains optimistic about equities’ ability to withstand a potentially higher interest rate environment. They believe that the market may need to adjust to recent data points but still expect the Federal Reserve to gradually ease its restrictive measures.
Overall, Citi’s sector calls reflect a changing market landscape, with a shift towards consumer discretionary and away from tech and cyclical sectors. Investors may want to keep an eye on these developments as they navigate the evolving market conditions.