Citigroup Inc. strategists downgraded US equities to neutral from overweight while upgrading China to overweight, saying that US exceptionalism is at least on pause.Citi had been overweight American stocks since October 2023, but the hiatus in their ability to outperform has become more obvious, Dirk Willer, Citi’s global head of macro research and asset allocation, wrote in a note. Meanwhile, he said, Chinese stocks look attractive even after their recent rally, given DeepSeek’s artificial-intelligence technology breakthrough, the government’s support for the tech sector and still-cheap valuations.
“The news flow from the US economy is likely to undershoot the rest of the world in coming months, and at least tactically, US exceptionalism is therefore unlikely to roar back,” Willer wrote. The neutral take on US stocks is over a three- to six-month time frame, and more negative US data prints are expected, he added.
Market sentiment around US stocks has soured rapidly after President Donald Trump kicked off a tariff war and continued to cut spending, fuelling concerns about the American economy. While the S&P 500 has lost 4.5% so far this year, a gauge of Chinese stocks listed in Hong Kong has surged 20%, making it one of the best-performing indexes in 2025.
