The U.S. market generally underperforms while Japanese and European stocks outperform after the first interest-rate hike by the Federal Reserve, according to Citigroup.

U.S. equities generally stumble toward the beginning of interest-rate hiking cycles by the Federal Reserve - but there are certain markets which outperform, according to Citigroup.

Strategists, led by Beata Manthey, wrote in a note published Sunday that U.S. stocks usually underperform after the first decision to raise rates before advancing over the following six to 12 months. But before that climb, Japanese and European markets generally outperform, they said.

Both Japanese and U.K. equities, specifically, perform better than their U.S. counterparts on average just over 50% of the time around the first hike in a cycle, the investment bank found. For Japan, relative returns reach on average 3%, while they near 2% for both the U.K. and Australia. Whereas in the U.S., directly following a hike, the relative return averages a loss of almost 2%.

For Citigroup, if the central bank tightens monetary policy on Sept. 16, prevailing concerns surrounding long-term bond yields rising will probably increase. However, the strategists noted that they see hikes as unlikely. The market is currently pricing in around a 60% chance of rates being raised, per FedWatch, while the New York-headquartered bank sees a hike not happening until June.

The strategists said that on average, global cyclical stocks do better than defensive stocks after the Fed raises rates. The bank is overweight on financial, material and technology stocks, and expects 5% upside for global equities by the end of the year.

But they also said that there is no such thing as an "average" tightening cycle, adding "history leaves us comfortable with our call for more global equity upside to mid-27."

-Nora Redmond