U.S. stocks upgrade due to 'growth-oriented' nature Investing.com

Citi analysts downgraded European stocks to neutral and raised their stance on U.S. stocks in their latest global equity strategy report.

Citing increased political risks in Europe and shrinking market leadership, they believe the United States is more attractive in the short term due to its “growth-oriented” nature and defensive nature.

The report noted “increased near-term risks to European equities,” highlighting political uncertainty and its impact on European bond spreads. That led Citi to downgrade continental Europe to neutral “until there are signs of abating near-term risks.”

The United States, on the other hand, received an upgrade due to its focus on growth industries such as technology and industry, while favoring defensive industries such as health care.

“We upgrade the U.S. rating as it has a much higher growth tilt relative to Europe and is more defensive in times of uncertainty,” they said.

Citi analysts believe these characteristics allow U.S. markets to perform better than Europe in the current environment, especially given the potential for a stronger dollar.

They argue that “potential strength in the U.S. dollar should be more conducive to U.S. outperformance.”

Additionally, the report suggests that continued political uncertainty could hamper European stocks that have been favored by U.S. investors in recent times.

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