Citi predicted capital flight from U.S. equities and global markets to rise in 2026

In 2026, investors will continue to get rid of U.S. stocks and buy foreign securities in order to diversify portfolios: this will ensure continued growth of the global stock index-benchmark for about 10% more, predicted strategists Citigroup. About it writes Bloomberg. At the same time, it is too early to turn away from the U.S.: S&P 500 will rise even stronger, the investment bank believes.

The key factor for the flow of investments from the U.S. to other markets analysts call the convergence of the dynamics of corporate profits in the U.S. and abroad. Citigroup considers possible improvement of profit per share of companies in key foreign markets: due to increase in government spending in Europe, measures to stimulate the economy in Japan and widespread introduction of artificial intelligence technologies, Bloomberg reports.

"Investors are now showinggreaterconfidence in equities outside the U.S.: current positions are markedly more optimistic about the rest of the world relative to the U.S. market, and overall risk appetite is broader than a year ago," Citi strategists said.

Citigroup expects the MSCI AC World Index to end the year at 1,360 points, which is about 10% above the closing level on Friday, January 9. At the same time, diversification, analysts emphasize, does not mean a direct sell-off of U.S. assets: Citi still forecasts growth of the S&P 500 Index by 11% in 2026.

The Citigroup team estimates that all major stock markets are now trading with valuations above their historical averages, but U.S. stocks remain the most expensive. But capital flow data so far points to only moderate rotation, Bloomberg notes. According to Citi strategists, Europe in 2025 recorded inflows for the first time since 2018, but they offset less than 10% of previous outflows.

"Against the backdrop of changing corporate earnings dynamics, the long-term flow structure continues to support the idea of diversification," Citigroup analysts wrote.

The team maintains an Overweight exposure to emerging market and European equities excluding the U.K., a Neutral stance on the U.S. and Japan, and an Underweight stance on the U.K. and Australia. Among global sectors, technology, financials and health care are favored, while consumer sectors are outliers, Bloomberg notes.

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