Citi continues to maintain a neutral stance on Indian markets, citing underperformance over the past 12 months and awaiting key catalysts for a potential re-rating. Drew Pettit, Director of US Equity Strategy/ETF Analysis & Strategy Research at the investment bank, outlined the firm's cautious approach while highlighting what could drive future allocation shifts.

Earnings Revisions Key to India Allocation Shifts

Pettit emphasized that earnings revisions changing could be the primary driver for allocation shifts in Indian markets. "Earnings revisions changing really could drive, I would say, allocation shifts. That's a big determinant for us," he explained. This focus on fundamental improvements reflects Citi's data-driven approach to emerging market investments.

The investment bank currently finds other emerging markets more attractive, particularly Korea and Taiwan, given the availability of artificial intelligence-linked stocks at reasonable valuations. This preference highlights the competitive landscape India faces in attracting global investment flows.

US Markets Outlook Remains Constructive

Despite the cautious stance on India, Pettit remains optimistic about US equity markets. After a volatile start to the year, he expects US markets to deliver positive returns supported by strong fundamentals and earnings growth.

Pettit acknowledged frequent market swings between fear and relief but stressed that Citi's optimistic outlook is anchored in robust earnings expectations. "Noise is going to come from headlines. Noise is going to come from rate volatility, it's going to come from dollar volatility… But at the end of the day, it's fundamental resilience, its earnings moving up and to the right," he noted.

Managing Market Volatility and Risk Factors

Addressing heightened geopolitical noise and policy uncertainty, Pettit cautioned against reacting too sharply to headlines, citing lessons from 2025. He emphasized that markets can weather turbulence as long as developments don't translate into tangible impacts on fundamentals.

However, Pettit identified bond market volatility as a potential risk factor, particularly if it originates from the Japanese government bond market, as this could affect investor appetite for risk assets. He noted that stronger-than-expected economic growth could serve as a counterbalance to such risks.

Requirements for Sustained Market Valuations

For markets to maintain high valuations and reach targets such as 7,700.00 on the S&P 500, Pettit outlined specific requirements:

• Bond volatility compression and sustained low levels
• Low interest rates environment
• Continued strong earnings growth
• Intact secular growth stories
• Supportive cyclical trends

"You really need bond volatility to compress and stay low, and rates to stay low. That's how you get sustainable higher valuations and really get that growth tailwind all at the same time," Pettit explained, reinforcing that strong earnings growth remains the ultimate solution for market concerns.

Citigroup is implementing another round of job cuts this week, eliminating approximately 1,000 positions as CEO Jane Fraser continues her cost-reduction strategy to improve the bank's performance and returns. The cuts represent the latest phase of a comprehensive restructuring plan announced two years ago.

Workforce Reduction Strategy

The current job eliminations are part of Fraser's ambitious plan to cut 20,000 positions by the end of 2026. The bank's workforce stood at 227,000 employees at the end of September, and the company aims to reduce this number significantly over the coming years.

According to Chief Financial Officer Mark Mason, the firmwide headcount will decline by roughly 60,000 positions by the end of 2026, bringing the total workforce to approximately 180,000 employees. This figure includes 40,000 staff members who will leave when the firm lists its retail banking businesses in Mexico through an initial public offering.

Transformation Under Fraser's Leadership

Since taking the helm in 2021, Fraser has led a comprehensive transformation of the New York-based bank. Her strategy focuses on streamlining operations and eliminating inefficiencies that have historically made Citigroup a laggard compared to other major US lenders.

Key elements of the transformation include:

• Exiting much of the international retail business
• Restructuring core operations
• Implementing technology-driven efficiencies
• Aligning staffing levels with current business needs

"We will continue to reduce our headcount in 2026," Citigroup stated. "These changes reflect adjustments we're making to ensure our staffing levels, locations and expertise align with current business needs; efficiencies we have gained through technology; and progress against our transformation work."

Recent Developments and Market Performance

This week marks a significant period for Citigroup, with the bank scheduled to report full-year results on Wednesday and inform staff of their bonuses for 2025. The timing of the job cuts alongside these announcements underscores the bank's commitment to cost discipline.

Fraser's leadership has gained recognition, with her becoming the first Citigroup CEO since 2007 to also lead the board of directors in October. However, the bank announced CFO Mark Mason's departure by the end of this year as he seeks CEO opportunities elsewhere.

Citigroup's shares soared 66% last year, outperforming all other major banks. However, the stock fell approximately 3.1% on Monday after President Trump demanded caps on credit card lending rates charged to US consumers, impacting the bank as a major credit card issuer.

Path Forward

To achieve the targeted workforce reduction, Citigroup will need to eliminate several thousand additional jobs throughout this year beyond the current week's cuts. The bank must also complete the listing of its Banamex business to reach its overall headcount reduction goals by 2026.