(Jan 10): Global stocks are likely to rally 10% this year, underpinned by robust corporate earnings growth and equity gains broadening outside the US, according to Citigroup Inc strategists.

Strategist Beata Manthey expects global earnings to also rise 10% as economic growth remains resilient, although she warned of risks over the policies of incoming US President Donald Trump. She retained a preference for US stocks, while Europe is the “favourite” pick for diversifying into sectors linked to the economic cycle.

“The macro picture remains supportive of additional corporate earnings growth and equity market gains,” Manthey wrote in a note, adding that she expects the US to continue outperforming until greater clarity on Trump’s policies, a softer stance on tariffs and a weaker dollar boost international equities.

The MSCI All-Country World Index has stalled in the new year after rallying more than 50% since the lows of 2022, as investors worry that potentially sweeping tariffs from the US could disrupt global trade. Political uncertainty in Europe and a stunted Chinese economy have also weighed on sentiment.

In the US, the focus is on whether the gains can spread to sectors beyond technology, after only a handful of heavyweights drove the rally in the past two years on optimism around artificial intelligence.

Citi’s Manthey said she expects the earnings gap between the Magnificent Seven group of tech stocks and the rest of the S&P 500 index to narrow this year.

Uploaded by Tham Yek Lee