Citi analysts are maintaining their recommendation for a balanced approach between growth and cyclical equities as the U.S. bull market enters a more volatile phase. Drew Pettit, in a note on Thursday, emphasized the firm's continued focus on barbell risk between these two sectors, with the strategy aimed at navigating potential macro weakness while capitalizing on earnings growth.

On the growth side, Citi prefers large-cap stocks for their defensive qualities during short-term economic softness and their ability to provide liquidity in broader portfolios. The firm projects $320 in 2026 S&P 500 earnings, positioning this near the Street's high estimates. For cyclical exposure, Citi recommends moving down the market-cap spectrum, particularly favoring small-cap value stocks that are expected to show the strongest earnings growth inflection.

The strategy comes as earnings support broadens across the market, with Citi noting a drastic decline in the number of S&P 500 companies with negative earnings growth expected in 2026. This improvement, which began during third-quarter results, has ended a multi-year earnings growth recession for small- and mid-cap stocks, providing additional validation for the firm's barbell positioning in the current market environment.