Jeanne Sun, head of portfolio advisory at Citi Wealth, indicated that the firm would have preferred a more significant stock market correction this year, believing that strong corporate earnings provide a solid foundation for equities. She noted that the market has experienced only shallow pullbacks, which have not significantly impacted investor sentiment.
Citi Wealth, which manages over $1 trillion in client assets, maintains a positive outlook on equities, even in the face of rising interest rates and elevated Treasury yields. Sun explained that the current rise in interest rates is primarily driven by real rates rather than inflation expectations, reflecting the underlying strength of the U.S. economy.
She anticipates a strong fourth quarter but warns of potential volatility due to uncertainties surrounding monetary policy and the upcoming U.S. midterm elections. Sun emphasized that higher borrowing costs have not yet undermined the benefits of robust economic growth and corporate earnings.
She pointed out that consumer spending remains resilient and corporate capital expenditures are strong, despite rising mortgage rates. However, she acknowledged the risks associated with high investor positioning in strong companies and rising earnings expectations, which could lead to increased volatility even if earnings continue to perform well.
Sun concluded that while earnings are expected to remain strong, the market's appetite for growth may create challenges for companies to meet elevated expectations