Fed’s 25 bps cut may be priced in, but US equity rally still has legs: Citi

Drew Pettit, Director of US Equity Strategy at Citi, said the expectation of a 25 basis point cut by the US Federal Reserve is fully priced in and if economic data remains stable, the rate cuts would support equity markets and risk assets.

Still, the strategist cautioned that markets might react with a short-term breather. “Technically, it could be a sell the news type of event because it’s fully priced into markets. But if the earnings estimates are unchanged, and we get good reports for Q3 and good 2026 outlooks, it’s a buying opportunity,” he said. A brief pullback, he argued, would be a healthy sign of a bull market rather than the start of a downturn.

Citi remains underweight emerging markets overall but is neutral on India. ” India has a reasonable growth story versus the rest of the EM but the pricing is far better than average growth,” he said.

Also Read | India’s outlook remains positive even with weaker rupee, says Milken economist

China and South Korea are the other EM markets of interest, while the US remains focused on mega-cap growth and Europe on value cyclicals.

Regarding US companies reporting earnings twice a year, Pettit said it is “still really early days.” He added that earnings remain positive for risk assets as long as companies continue to beat and raise expectations.

For the full interview, watch the accompanying video

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