Citi's latest House Views, released in February 2026, keeps the bank constructive on equities while changing regional and sector exposures to reflect what its economists call a "Goldilocks view." The note signals that liquidity "likely remains plentiful, favoring risky assets," yet heightened uncertainty around artificial intelligence has led Citi to preserve specific defensive positions.
The bank is maintaining an overall overweight in equities but is recalibrating where that equity exposure sits. In the U.S., Citi will "move half of the US allocation into small caps," broadening away from the largest technology companies and increasing exposure to smaller-capitalization stocks.
Portfolio-level hedges and rationale
To balance risk, Citi is positioning portfolios with "a credit underweight, as well as a duration overweight." The bank argues that elevated U.S. rates "will work as a hedge against a bursting AI bubble or against an AI-driven labor market dislocation." The note also suggests that in this environment "risk-parity portfolios may be rehabilitated."
"Likely remains plentiful, favoring risky assets," and "rising concerns around artificial intelligence justify maintaining certain hedges," the note states.
Regional and sector changes
Citi says it remains overweight U.S. and Japanese equities while making reductions elsewhere. The bank will "cut China" and is narrowing its U.K. underweight to 50 percent.
On sector weights, Citi is moving away from the megacap growth trade. The firm has downgraded technology to neutral and lowered consumer discretionary to underweight. Conversely, industrials have been upgraded to overweight, and materials moved to neutral.
Fixed income and commodities positioning was also adjusted. Citi stays underweight credit and reports a more balanced stance in commodities after taking profits in base metals, while remaining neutral on precious metals and energy.
Implications
The note outlines a strategy that preserves a constructive stance on risk assets but layers in protections tied to rate exposure and credit underweighting. It shifts U.S. exposure toward smaller companies and rotates sector weights to favor industrials and a neutral materials position, while trimming China exposure and dialing back the most growth-oriented sectors.