CNBC Television
Investors now have a reason to take some gains from stocks, says Citi's Drew Pettit
11/6/2025, 6:53:25 PM
Economic Summary
- The market is decoupled from the real economy: structural AI spending and productivity are estimated to drive roughly half of S&P performance, while traditional cyclicals and macro factors drive the other half (examples include NVDA and AMZN).
- Citigroup expects inflecting earnings growth for small caps and cyclicals into 2026 if a recession is avoided, implying a cyclical recovery that can complement ongoing AI-led growth and extend the bull market.
- Fair value for the S&P is estimated around 6,600; pullbacks have been getting shallower because base earnings continue to rise, so short-term corrections may occur but longer-term trajectory remains upward given solid earnings growth.
Bullish
- AI and productivity drive ~half of S&P, supporting long-term gains (NVDA, AMZN).
- Cyclicals and small caps could see an earnings inflection into 2026, boosting those sectors.
- Pair growth/AI beta with cyclical beta to diversify and capture medium-term outperformance.
Bearish
- Much of the good news is priced in, risking a near-term pullback to fair value.
- AI trade could cool off, triggering short-term weakness in growth names.
Bullish tickers
NVDAAMZNBSXCOFEFX
NVDA
Bullish
Key AI/semiconductor beneficiary with upside beyond current pricing; fits a GARP approach to AI exposure.
Bearish
Short-term cooling of the AI trade could pressure gains; high expectations are priced in.
AMZN
Bullish
Major AI enabler and infrastructure play; attractive for allocating capital to AI-related exposure.
BSX
Bullish
Healthcare productivity enhancer with potential quality inflections, representing cyclical/sector opportunity.
COF
Bullish
Financial name positioned to benefit from cyclical improvement and productivity inflections in lending.
EFX
Bullish
Could benefit if the mortgage market improves in 2026, supporting revenue cycles.
People mentioned
Drew PettitDon