Citi updated clients Monday, arguing that recent fourth-quarter earnings trends reinforce the firm’s view for 2026. In a note, analyst Scott Chronert said the bank "maintains a constructive fundamental outlook for 2026, supported by positive Q4 '25 earnings trends and an accelerating sales trajectory across market capitalizations."
The firm highlighted that consensus earnings estimates for the current year have been unusually stable, a development it treats as a positive signal at this point in the calendar. Chronert noted that Citi’s 2026 S&P 500 earnings projection sits above consensus at $320, a figure the bank attributes to "ongoing soft-landing conditions and AI spending tailwinds."
On policy matters, Citi said the recent IEEPA ruling "should be an incremental positive to earnings," while cautioning that tariff-related volatility remains a risk as policy uncertainty has re-emerged. The firm also referenced a recent Supreme Court decision as contributing to the renewed uncertainty around tariffs.
Looking at the latest reporting season, Citi reported a "positive earnings surprise in line with our +4% expectation," and said this outcome has lifted its full-year 2025 earnings estimate to about $275. The bank emphasised that 2026 forecasts have "remained stable at the index level," which it regards as encouraging given the tendency for early-year guidance to be reset.
Citi pointed to a notable strengthening in sales momentum among large-capitalisation companies, describing an "accelerating bias in sales and earnings trajectories for large cap over the past year." By contrast, the bank said small- and mid-cap companies will need improved margin performance if they are to meet current growth expectations.
Regarding artificial intelligence, Citi acknowledged that disruption concerns are likely to persist. However, the firm expects those concerns to be reflected more in valuations than in 2026 earnings projections, stating that such effects will "be reflected more in valuations than in '26 earnings expectations."
Overall, despite the renewed tariff uncertainty following the Supreme Court ruling and related policy developments, Citi said its broader fundamental outlook for the market remains intact.
Key takeaways:
- Citi maintains a constructive fundamental outlook for 2026, supported by positive Q4 2025 earnings trends and stronger sales momentum among large caps.
- The bank projects S&P 500 earnings of $320 for 2026 and has raised its 2025 estimate to about $275 after Q4 results matched a +4% surprise expectation.
- Policy uncertainty related to tariffs and ongoing AI-related valuation concerns are noted as the principal risks to this outlook.