Pettit said earnings downgrades in India have started to settle, and the domestic economic story remains intact. But after a strong run, he believes valuations now look full. This explains Citi’s recent downgrade of India to a ‘neutral’ stance within its emerging market (EM) strategy.
“Maybe take some profits here, keep that allocation closer to more what a benchmark weight might be, and then buying again, some of the secular growth stories that maybe markets have kind of forgotten about,” he said.He sees better value in other EMs like China and South Korea, where earnings upgrades and exposure to secular tech themes, especially artificial intelligence (AI), are beginning to draw investor interest.
Japan, too, is back in focus following clarity on tariff rates. Pettit noted that investors had already begun reallocating to international equities, including Japan, in the lead-up to the latest announcements. He added that the 15% tariff outcome for Japan was better than expected and could support flows back into the region.
Pettit also flagged that ETF flows show rising interest in non-US equities, including those in Asia. American investors have started adding to international funds, reversing a long stretch of US-dominated flows.
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In the US, Pettit remains constructive on growth stocks and advised buying into any near-term corrections. “We’d be buyers of US growth on pullbacks throughout this earnings season,” he said. That said, he cautioned that markets currently look “pretty fully valued,” and a short-term pullback is reasonable given stretched sentiment and high multiples.
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For the entire interview, watch the accompanying video
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