Citi Projects Continued Rally in Global Stocks Through 2025 with 10% EPS Growth

The financial world is abuzz with optimism as Citi has recently forecasted that the rally in global stocks is likely to extend into 2025, underpinned by an expected 10% growth in earnings per share (EPS). This bullish outlook raises several questions about the potential implications for financial markets, indices, and individual stocks. In this article, we will delve deeper into the short-term and long-term impacts based on similar historical contexts, while also identifying the indices and stocks that may be affected.

Short-Term Impact on Financial Markets

In the short term, Citi's forecast is likely to create a positive sentiment among investors. Historically, such optimistic predictions have led to increased buying activity in the stock markets, resulting in price surges. For instance, after the International Monetary Fund (IMF) raised its global growth forecast in October 2017, global indices such as the S&P 500 (SPX) and the FTSE 100 (FTSE) rallied significantly over the subsequent months.

Potentially Affected Indices:

• S&P 500 (SPX)
• NASDAQ Composite (IXIC)
• Dow Jones Industrial Average (DJIA)
• MSCI World Index (MXWO)

Potentially Affected Stocks:

• Apple Inc. (AAPL)
• Microsoft Corporation (MSFT)
• Amazon.com Inc. (AMZN)
• Tesla Inc. (TSLA)

The anticipated 10% EPS growth indicates a robust economic recovery and increasing corporate profits, which will likely drive stock prices higher. Investors may also rotate into cyclical stocks that benefit from economic expansion, such as those in the industrials and consumer discretionary sectors.

Long-Term Impact on Financial Markets

Looking further ahead, if Citi’s projections materialize, we could see a sustained bull market. Historically, periods of extended stock market rallies are often characterized by low interest rates and favorable fiscal policies. For example, the post-2008 financial crisis period saw a prolonged bull market fueled by low borrowing costs and quantitative easing measures implemented by central banks.

Key Indices to Monitor:

• Russell 2000 (RUT): Smaller companies often benefit in a growing economy.
• Global X MSCI China Financials ETF (CHIX): Exposure to emerging markets could yield substantial returns.

Futures to Watch:

• S&P 500 Futures (ES)
• NASDAQ-100 Futures (NQ)

Historical Context

To put this forecast into perspective, we can look at similar events in history. For instance, in March 2019, the Federal Reserve signaled a pause in interest rate hikes, leading to a rally in global stocks that lasted well into 2020. The S&P 500 surged over 30% in 2019 alone, driven by investor confidence and rising corporate earnings.

Date of Historical Similarity: March 2019

Following the Fed's announcement, global indices rallied significantly:

• S&P 500 (SPX) increased from approximately 2,600 points to over 3,200 points within one year.
• DJIA also experienced a similar rise, confirming the correlation between positive economic forecasts and stock market performance.

Conclusion

Citi's forecast for a sustained rally in global stocks and anticipated EPS growth is a strong indicator of positive market sentiment. Short-term effects are likely to include a surge in stock prices and increased buying activity, particularly in sectors poised for growth. In the long run, if these projections come to fruition, we could witness a prolonged bull market similar to those seen in historical precedents.

Investors should keep a close eye on the major indices and the stock market's overall performance, as these factors will shape the investment landscape moving forward. As always, it's essential to conduct thorough research and consider individual risk tolerance before making investment decisions based on market projections.