Citigroup Downgrades US Equities After 3 Trillion Dollar Sell-Off

Citigroup downgraded U.S. equities from overweight to neutral after a sharp market sell-off erased US$3 trillion in value from S&P 500 companies. The brokerage attributed the decline to soaring AI spending and the risk of stricter regulations, noting that Democratic wins in U.S. midterm elections have increased opposition to new data centers in several states.

As part of the shift, the firm lowered its outlook on global and European technology sectors to neutral. Lead strategist Beata Manthey warned that positioning on key indices, such as the Nasdaq, could reset lower into net-short territory.

While reducing its tech exposure, Citigroup raised its outlook on European equities excluding the UK, citing lower sensitivity to tech volatility and falling oil prices. The firm also upgraded Global Health Care and European Food & Beverage to overweight.