The boom in US stocks continues! Citi optimistically predicts that technology stocks will lead next year, and lagging sectors will follow suit

The Zhitong Finance App learned that Scott Chronert (Scott Chronert), head of US stock strategy at Citigroup, believes that the current market is in a “boom period” rather than a “bubble period”; looking ahead to the new year, he is optimistic about the market outlook based on strong profit expectations and the upcoming spread of industry sectors.

Cronett described Citi's analytical position as a “half glass of water perspective” (glass half full) when evaluating the kinetic energy of artificial intelligence (AI) development, that is, focusing more on positive factors.

“There have always been discussions about a boom period or a bubble period, and we are in a boom phase,” he said.

Despite admitting that investors may be paying early premiums for next year's fundamentals, Cronet stressed that the overall market environment is still showing a “very constructive” positive trend.

Citi's profit forecast is in the high range that sellers agree to expect, and its model predicts that corporate profits will grow by 3.2% in the coming year. In response, Cronet added, “We actually have a pretty positive view of this.”

The core driver of this optimistic forecast is the continued overperformance of large technology stocks. He further pointed out that the “Mag 7 elite camp” composed of Google (GOOGL.US), Amazon (AMZN.US), Meta (META.US), Microsoft (MSFT.US), Nvidia (NVDA.US), Tesla (TSLA.US), and Apple (AAPL.US) is expected to continue the strong trend of “performance exceeding expectations and upward guidance” (beat and raise) (beat and raise) (beat and raise); these seven stocks together account for about 40% of the total market value and are still driving the core profit growth of the index engine.

The core driver of this optimistic forecast is the continued overperformance of large technology stocks. He further pointed out that the “Mag 7 elite camp” composed of Google (GOOGL.US), Amazon (AMZN.US), Meta (META.US), Microsoft (MSFT.US), Nvidia (NVDA.US), Tesla (TSLA.US), and Apple (AAPL.US) is expected to continue the strong trend of “performance exceeding expectations and upward guidance” (beat and raise) (beat and raise) (beat and raise); these seven stocks together account for about 40% of the total market value and are still driving the core profit growth of the index engine.

The second driver is that the rally is expected to spread to other sectors that have recently lagged behind. Cronet pointed out that sectors such as energy (XLE), materials (XLB), REITs (XLRE), and utilities (XLU) contributed negatively to the index's earnings growth this year.

Looking ahead, he believes that these backward sectors will improve and add further support to the overall healthy profit picture.