Stocks are gripped by 'near-euphoric sentiment' and the election may offer a chance to pull back, Citi says

• Citi strategists cautioned investors against piling into a rally fueled by a Trump victory.
• They said a imaginable rally could slow aft nan first euphoria wears off.
• A Harris triumph could coming a short-term buying opportunity, they added.

Citi strategists aren't emotion awesome astir either US statesmanlike candidate's effect connected nan banal market, but a Republican sweep, successful particular, mightiness punctual investors to rethink their exposure.

Citi analysts noted that while galore property nan caller surge of bullishness to climbing likelihood for a Donald Trump victory, rising marketplace optimism whitethorn beryllium linked to different factors.

"All told, we support a position that some campaigner platforms are incrementally antagonistic to equity fundamentals," nan analysts said successful a statement connected Tuesday. "Generally, we are inclined to lighten into immoderate further Trump tailwinds post-election."

The Citi strategists said that valuations and "near-euphoric sentiment" successful nan S&P 500 person much to do pinch things different than nan predetermination that person been influencing stocks for astir of this year.

"We publication it much astir soft landing sentiment, ongoing AI-influenced maturation tailwinds, on pinch a pivoting Fed."

That intends investors should debar piling into a marketplace rally fueled by a Trump win, since it could slow considerably aft nan first euphoria wears disconnected successful nan coming months, nan analysts said.

"Any further post-election travel done presents an opportunity to lighten into what whitethorn beryllium a much confusing election-impacted basal image early adjacent year," they wrote.

The analysts added that they spot neither campaigner arsenic a peculiarly affirmative power connected nan banal market, though a Trump triumph would apt beryllium much beneficial. Trump's deregulatory attraction and little firm taxation rates person mostly been touted arsenic much business-friendly and a boost to earnings, while his proposals for soaring tariffs connected imports could airs longer-term downside risks.

But while nan analysts spot Kamala Harris's higher firm taxes arsenic much antagonistic for US equities overall, a Harris triumph could airs a short-term, buy-the-dip opportunity.

"On nan different hand, while a Harris + divided result whitethorn trigger immoderate first marketplace pressure, our inclination would beryllium to bargain into related weakness," they wrote.