In a recent analysis, Citi urged investors to approach U.S. stock rallies with caution if the upcoming presidential election results in a Republican victory. Citi’s note emphasized the potential market volatility and suggested that investors consider selling during any post-election stock rally under a Republican sweep.
The bank’s analysts highlighted that a Trump win combined with a Republican-controlled Congress could introduce significant uncertainty for the S&P 500. Although polling remains close, Citi observed a shift in expectations toward former President Donald Trump, with recent national polls and betting markets, such as PredictIt, tilting in his favor. Changes in key swing states and Senate polling data also suggest the possibility of a modest Republican majority.
Citi remains cautious about Trump’s proposed policy changes, particularly in areas like tariffs and taxes, which they believe could pose risks to U.S. equity fundamentals. While Trump has updated parts of his platform, Citi analysts still see these policies as potentially detrimental to market stability.
Additionally, the influence of Elon Musk, who is now advising Trump, introduces new questions. Citi commented that while it’s uncertain how a proposed Department of Government Efficiency might take shape, Musk’s involvement could signal a focus on government spending and the federal deficit.
The report also noted that U.S. equities have shown strong performance in the third quarter, especially within financial and technology sectors. However, Citi cautioned that these gains are likely influenced by various macroeconomic factors and solid Q3 earnings, rather than election sentiment alone.
In closing, Citi advised a conservative approach, suggesting investors “lighten” positions in the event of a post-election rally if Republicans gain control.
