The new edition of Citi Research’s Global Equity Quarterly updates our global equity allocation. While we remain constructive on global equities, we worry that stretched valuations could cap future upside if earnings per share fail to deliver. We see three key themes as likely to shape equity-market performance, led by the broadening thesis, in which strong growth in earnings per share leads to a broad-based rally.

The global economy has shown impressive resilience in recent years but current risks appear significant, ranging from tariffs in the near-term to longer-term risks such as public debt, aging demographics and economic and geopolitical fragmentation. We wrestle with these competing viewpoints in a new Citi Research report.

Consumers and firms have absorbed tariff pressures surprisingly well, and our narratives for global inflation, monetary policy and markets have remained broadly intact. In a new Citi Research note, Chief Economist Nathan Sheets and a team of analysts and economists offer their expectations for global growth and consider the risks to our forecast, which they see as roughly balanced. They also look at which groups appear to be bearing the cost of tariffs so far.