Citigroup forecasts MSCI ACWI index at 1,150 by mid‑2026 expecting 5% global growth

Citigroup Predicts MSCI ACWI to Hit 1,150 by Mid 2026 Amid Optimism for Global Growth
In a significant expression of confidence in the resilience of global markets, Citigroup has projected that the MSCI All Country World Index (ACWI) will reach 1,150 by mid 2026. This benchmark, which tracks a wide array of equities from both developed and emerging markets, reflects broader sentiment about the trajectory of international investment and economic growth. The forecast is built on expectations of 5% global economic growth over the next two years, underscoring a cautiously optimistic outlook from one of the world's leading financial institutions. While uncertainty persists due to geopolitical and monetary headwinds, Citigroup believes the worst may be over for equities, setting the stage for gradual recovery.

Citigroup’s projection comes at a time when global equity markets are navigating a delicate balance between slowing inflation and high interest rates. The firm anticipates that while 2025 may remain largely range bound in terms of stock performance, 2026 could usher in stronger earnings growth and broader investor confidence. According to their analysis, company earnings across major sectors are likely to rebound by the second half of 2025, with the momentum carrying into 2026. The financial giant sees earnings per share (EPS) growth accelerating to approximately 11% in 2026, compared to a more modest 5% in 2025. This projected surge in profitability, coupled with more stable inflation expectations, forms the cornerstone of their positive market outlook.

A notable aspect of Citigroup’s forecast is the emphasis on regional divergence in market potential. While U.S. equities have historically driven the bulk of global stock performance, Citigroup believes the spotlight will gradually shift to Japan and Europe. Both regions, the bank argues, have been undervalued and underappreciated in recent years. Structural reforms in Japan including changes in corporate governance and increased foreign investor engagement have opened up new avenues for growth. In Europe, the expected stabilization of monetary policy, recovery in industrial production, and easing of political uncertainties may create an attractive environment for investors looking for relative value.

Conversely, Citigroup has adopted a more cautious tone toward the U.S. equity market, pointing to elevated valuations and lingering concerns over monetary tightening. The Federal Reserve's current stance of maintaining higher for longer interest rates continues to place downward pressure on growth sectors, particularly those reliant on cheap borrowing costs. Furthermore, the looming possibility of political shifts and trade policy changes during the U.S. 2024 presidential cycle adds a layer of unpredictability. Although the American tech sector remains an outperformer, Citigroup suggests a more selective approach within the U.S., focusing on sectors like software, AI, and clean energy, while avoiding cyclical and consumer discretionary names.

Citigroup also issued a bearish outlook for emerging markets and commodity heavy economies like Australia. Emerging economies are expected to remain sensitive to global trade disruptions, currency volatility, and inflationary pressures. Additionally, slowing demand from China, a key trading partner for many emerging and resource based economies, may weigh heavily on their performance. For investors with exposure to these regions, Citigroup advises caution, highlighting that while long term prospects may still be strong, the short to medium term landscape remains fraught with risk. Strategic positioning, they suggest, should involve defensive plays and globally diversified exposure.

Another key theme in Citigroup's outlook is the opportunity for sector rotation. As economic conditions evolve, sectors tied to structural and policy driven growth trends such as green infrastructure, digital transformation, and health tech are expected to outperform more cyclical industries. Citigroup advises investors to gradually rotate portfolios toward companies benefiting from climate policy mandates, AI integration, and demographic shifts. These areas are likely to remain relatively insulated from short term macroeconomic turbulence and may benefit from supportive fiscal spending across both developed and emerging economies.

Ultimately, Citigroup's 1,150 target for the MSCI ACWI index is not a call for irrational exuberance, but rather a measured endorsement of global resilience. It reflects a scenario where inflation stabilizes, monetary policy softens without reigniting overheating, and companies regain profitability momentum. Investors are urged to adopt a patient but proactive approach diversifying across regions, embracing long term growth trends, and remaining nimble in the face of policy and economic shifts. While challenges remain, the long term narrative, according to Citigroup, is one of recovery, rebalancing, and renewed investor confidence in a post pandemic, structurally evolving world economy.