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Last week delivered one of the most volatile stretches for equities this year. The CBOE Volatility Index spiked above 50 on Thursday, erasing much of the prior day’s rally—when Trump announced a 90-day delay on some new tariffs, triggering the third-largest one-day gain in U.S. stocks since WWII.
Despite that rebound, the major indexes remain in negative territory since the original tariff announcement. The S&P 500 is down 5.4%, the Nasdaq Composite has fallen 5%, and the Dow is off 4.8%. Apple alone shed nearly $640 billion in market cap across just three sessions.
Citi Downgrades U.S. Equities on Valuation Risks
Citigroup downgraded U.S. equities to neutral, warning that valuations remain elevated and earnings downgrades are still to come. The firm pointed to tariff risks, geopolitical concerns, and investor reallocations as reasons to diversify away from U.S. markets. Citi highlighted Japan and Europe as more attractive due to lower valuations and more conservative earnings expectations.
Despite short-term potential for tech rebounds, Citi noted cracks in U.S. equity strength are forming, reinforced by a weaker dollar and rising Treasury yields. The Magnificent Seven may see short-term relief, but broader U.S. equity outlooks remain under pressure.
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