Citibank: Strong corporate earnings will support overall US stock valuations remaining high in 2026, maintaining a "hold" on US stocks.

Citibank's director of investment strategy and asset allocation, Liu Jiahao, said that the bank's analysts expect strong corporate earnings to support high valuations of US stocks. Citibank's analysts have forecasted higher profit growth for most industries compared to market consensus, and expect the market to raise profit forecasts, especially for value stocks, cyclical stocks, and small and medium-sized stocks. He further stated that this year, the bank maintains a "buy" view on US stocks. Data from the past shows that the valuation of US stocks is not directly related to returns, and he believes that three factors will continue to benefit US stocks: interest rate cuts, support for corporate earnings, and the development of artificial intelligence. As the profit environment of US stocks becomes healthier, it is a key factor supporting the valuation of US stocks. The profitability of US companies is also showing widespread recovery this year, with the S&P 500 industry earnings per share forecast expecting to increase by 16.3% compared to last year's 13%. He pointed out that as the market begins to shake off various influences of the Trump administration's policies for 2025, and the US economy remains relatively stable or even improving, market confidence in factors other than growth giants in US stocks is also significantly improving. It is expected that the volatility of US stocks in 2026 will be similar to that of 2025, but may also present strategic opportunities for absorption. Liu Jiahao said that the acceleration of artificial intelligence applications is still the best indicator of measuring healthy demand, and the revenue growth of the four major cloud giants in the United States reflects the market's demand for AI. In the third quarter, cloud revenue reached $74 billion, with a year-on-year increase of 2 percentage points to 30%. Backlogged orders have also significantly increased, reflecting current supply constraints: that is, super-scale cloud providers do not have enough computing power to meet the accumulating orders. He pointed out that the bank's analysts believe that the current AI environment is more of a "prosperous era" than a "bubble," and the trend of corporate capital expenditures remains clear. Raising profit forecasts can also support the stock market, but with expectations for high valuations and profit growth simultaneously, volatility is likely to continue to affect the market in the visible future.