Citi Strategist Recommends Barbell Strategy for AI and Small-Cap Stocks

Citi US equity strategist Scott Chronert recommends a 'barbell' investment strategy combining exposure to Nasdaq AI stocks with small-cap non-AI companies, according to a CNBC interview. Chronert cited uncertainty around the persistence of the AI infrastructure trade as the rationale for diversifying into small-cap equities, which he described as the most leveraged play on market broadening beyond AI. The recommendation comes amid ongoing discussions about potential rotation in US equity markets away from concentrated mega-cap technology positions.

Chronert Details Barbell Strategy Combining AI and Small-Cap Exposure

Chronert explained his dual-exposure approach in the CNBC interview: "The issue here is less about conviction and earnings and more about the persistence of this AI infrastructure trade persisting, and that's going to be an ongoing discussion. When we look at the market setup, it's pretty simple. We want to have exposure to this Nasdaq component where the earnings momentum is so strong, but we want to barbell it with going down cap into small cap. It's probably the most leveraged non-AI and broadening trade. The other sectors – industrials, financials, consumer discretion – they all have storylines that we can talk about, but we do think this down cap trade probably has some legs."

Citi Projects S&P 500 Earnings Per Share at 350 for Current Year

Chronert maintained a bullish outlook on S&P 500 earnings through 2027. He stated: "When we look at the aggregate S&P setup, we're really comfortable with our ahead of expectation earnings outlook for this year. We're at 350 [earnings per share] for this year. Consensus is 341. We feel very good about our 350 and it could be conservative – 400 for next year [is] certainly line-of-sight." Citi's earnings per share forecast of 350 exceeds the consensus estimate of 341.

FAQ

What is Scott Chronert's barbell strategy for equity investing?

Scott Chronert's barbell strategy involves maintaining exposure to Nasdaq AI stocks with strong earnings momentum while simultaneously investing in small-cap non-AI companies. He described small-cap equities as the most leveraged play on market broadening beyond the AI infrastructure trade.

What is Citi's S&P 500 earnings forecast compared to consensus?

Citi projects S&P 500 earnings per share at 350 for this year, above the consensus estimate of 341. Chronert stated the firm feels very good about the 350 forecast and considers it potentially conservative, with 400 earnings per share projected for next year.