As the political landscape begins to heat up ahead of the U.S. elections, Citi’s latest asset allocation strategy note highlights a focus on mitigating election-related risks while capitalizing on cyclical opportunities.
The firm advises a shift in investment strategies to “election proofing” portfolios, considering recent market trends and economic indicators.
Citi notes that weaker U.S. economic data has prompted expectations of a Federal Reserve rate cut in September. Despite this, they recommend investors “pare back risk” while maintaining a cyclical and technology bias.
The firm remains “overweight” on U.S., Taiwan, and Korea equities, but is taking profits on Japanese stocks.
In contrast, Citi is “underweight” on the more defensive U.K. market, now FX-hedged, and has added an “underweight” stance on the European Union.
Sector-wise, Citi is “overweight” on banks and consumer discretionary stocks but “underweight” on energy. In the fixed income space, they suggest remaining “overweight” on EU periphery and U.K. government bonds compared to Japan, and have removed their short position on France.
On the credit front, Citi advises taking profits on “overweight” European investment-grade bonds versus U.S. bonds, while maintaining an “underweight” position in U.S. investment-grade bonds as a risk-off hedge.
In commodities, Citi is taking profits on , maintaining an “overweight” position in precious metals, and adding an “underweight” stance on oil.
Citi’s strategy reflects a cautious yet opportunistic approach amid weakening seasonals and political uncertainties, focusing on sectors and regions that offer stability and growth potential in a volatile environment
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