Citigroup: Strong corporate profits will support a high overall valuation of US stocks and maintain “increase” in US stocks in 2026

The Zhitong Finance App learned that Liu Jiahao, head of investment strategy and asset allocation at Citibank, said that the bank's analysts expect strong corporate profits to support the high overall valuation of US stocks. Citigroup analysts' profit growth forecasts for most industries are higher than market forecasts, and they expect the market to raise profit forecasts. The increase in profit forecasts for value stocks, cyclical stocks, and small to medium stocks is particularly obvious.

He further stated that he maintains the view of “increasing holdings” on US stocks this year. Past data shows that high or low US stock valuations are not directly related to returns, and he also believes that three major factors continue to benefit US stocks, including interest rate cuts, corporate profit support, and the development of artificial intelligence. As the profit environment for US stocks is becoming healthier, this is the only factor supporting the valuation of US stocks. The profitability of US companies is also recovering widely this year, indicating that the S&P 500 industry's earnings per share forecast is expected to be 16.3%, which is higher than 13% last year.

He pointed out that as the market began to get rid of the Trump administration's various policy issues affecting 2025, and the US economy generally remained stable or even improved, the market had high confidence in the broad improvement of the basic profit factors of US stocks other than growth giants. The volatility of US stocks in 2026 is expected to be close to the 2025 market situation, but at the same time, it may be a strategic absorption opportunity.

Liu Jiahao said that the acceleration of artificial intelligence applications is still the best indicator for measuring the health of demand. The revenue growth rate of the four major US cloud giants reflects market demand for AI. The total cloud revenue in the third quarter reached 74 billion US dollars, an increase of 2 percentage points to 30% over the previous year. The backlog of orders has also increased dramatically, reflecting current supply restrictions: that is, hyperscale cloud stock vendors do not have sufficient computing power to meet the continuous accumulation of orders.

He pointed out that the bank's analysts believe that the current AI environment is a “boom” rather than a “bubble”. The trend of corporate capital expenditure is still clear, and raising profit forecasts in the market can also support the stock market, but valuations and market expectations for profit growth are both high, so volatility will still affect the market in the foreseeable future.