Would not be putting more money to work in risk assets at this point, says Citi's Kate Moore

Key Concepts

• Economic Slowdown: A deceleration in the rate of economic growth.
• Tariffs: Taxes imposed on imported goods.
• Consumer Sentiment: The overall attitude of consumers regarding the economy and their financial well-being.
• Recession Probability: The likelihood of an economy experiencing a recession within a specific timeframe.
• GDP Decline: A decrease in the Gross Domestic Product, the total value of goods and services produced in a country.
• Equity Prices: The prices of stocks or shares in the stock market.
• Concentrated Positioning: When a large number of investors are heavily invested in the same assets.
• Rebalancing: Adjusting the proportions of different asset classes in an investment portfolio.
• Risk Assets: Investments that have a higher level of risk, such as stocks and high-yield bonds.
• Trading Range: The range between high and low prices in which a security or asset typically trades.
• Earnings Season: The period when a large number of public companies release their quarterly earnings reports.
• Guidance: A company's forecast of its future financial performance.

Economic Slowdown and Consumer Sentiment

Kate Moore, the chief investment officer at Citi Wealth, notes that the economy was slowing down even before the recent discussions about tariffs. While the consumer held up well in 2024, there are signs of a slowdown in consumption and a degradation in consumer sentiment at the beginning of 2025. This slowdown is not catastrophic but is a real concern.

Recession Probability and Market Conditions

A recent study indicated a 43% probability of a recession in the United States within the next 12 months. While this is an increase, Moore points out that a 40% recession probability is not catastrophic, and there is still a better chance of avoiding two consecutive quarters of GDP decline. Equity prices were high at the start of the year, with concentrated positioning, meaning many investors were overweight in US stocks. This created room for rebalancing.

Investment Strategy in the Current Environment

Moore advises against putting more money to work in risk assets like equities or credit at this time. She suggests maintaining current holdings for medium and longer-term investors but taking advantage of tactical opportunities. She anticipates the equity market will be caught in a trading range due to technical pressures and policy fears.

Earnings Season and Company Guidance

Moore expresses skepticism about relying on earnings season for definitive answers, as company leaders are also uncertain about future policies. She highlights that companies pulling guidance in first-quarter earnings, rather than simply adjusting it lower or higher, would be a concerning sign. This lack of visibility could lead to inconsistent spending, hiring, and investment behaviors.

Notable Quotes

• "The economy was not perfect at the start of this year."
• "I would not be putting more money to work in kind of risk assets at this point."
• "Be patient. We're going to get a good bite at the apple."

Synthesis/Conclusion

The economy is showing signs of slowing down, and there is increased uncertainty due to policy concerns. While a recession is not a certainty, investors should be cautious and avoid putting more money into risk assets. Monitoring company guidance during earnings season is crucial, and a lack of visibility from companies would be a negative signal. Patience and a focus on high-quality companies are recommended for long-term investment strategies.