Citi’s latest research signals that the U.S. equity market remains in a bull phase but is becoming more volatile as investors wrestle with the long‑term threat of AI disrupting established business models. The bank calls the trend a “more volatile bull,” a pattern already visible beneath the range‑bound S&P 500.

Citi warns that fears of AI‑driven disruption are shifting focus from near‑term earnings to longer‑term valuation risks. The analysts cite “terminal” multiple concerns, questioning whether sustainable profits and growth will endure in a more competitive, AI‑powered landscape. The risk lies in margin uncertainty rather than an immediate earnings hit.

The market reaction has been uneven. Single‑stock volatility has accelerated faster than index‑level gauges, and stock correlations sit near two‑decade lows. Rolling sector corrections offset one another, keeping the headline index stable despite weak sentiment in parts of the market.

For the broader market to resume a sustained advance, Citi says investors need clearer evidence of a soft economic landing—lower inflation and interest rates—or proof that companies’ competitive advantages remain intact. Until then, elevated stock‑specific volatility is likely to persist even if the index appears steady.