According to Scott Chronert, US Equity Strategist at Citigroup, the current market is in a "boom phase" rather than a "bubble phase." Looking ahead to the new year, he remains optimistic about the market outlook, based on strong earnings expectations and an anticipated broadening of sector performance. Chronert described Citi's analytical stance as a "glass half full" perspective when assessing the momentum of artificial intelligence (AI) development, meaning it focuses more on the positive factors. "The discussion about boom versus bubble is always there, and we are in the boom phase," he stated. While acknowledging that investors might be paying a premium for next year's fundamentals in advance, Chronert emphasized that the overall market environment still presents a "very constructive" positive trend. Citi's earnings forecasts are at the high end of the sell-side analyst consensus range, with its models predicting corporate earnings growth of 3.2% for the coming year. Chronert added in response, "We actually hold a fairly positive view on this."

The core driver of this optimistic outlook lies in the continued outperformance of large-cap technology stocks. He further pointed out that the "Mag 7 elite group," consisting of Alphabet (GOOGL.US), Amazon (AMZN.US), Meta (META.US), Microsoft (MSFT.US), NVIDIA (NVDA.US), Tesla (TSLA.US), and Apple (AAPL.US), is expected to maintain its strong pattern of "beating earnings estimates and raising guidance." These seven stocks collectively account for approximately 40% of the total market capitalization and remain the core engine driving index-level earnings growth.

The second driving factor is the potential for the rally to broaden into other sectors that have recently lagged. Chronert noted that sectors such as Energy (XLE), Materials (XLB), REITs (XLRE), and Utilities (XLU) have contributed negatively to index earnings growth this year. Looking forward, he believes these lagging sectors will improve and provide additional support to the overall benign earnings picture.