Citi's Scott Chronert: Evidence earnings growth expectations are starting to broaden

Market Overview & Strategy - Citi raised its year-end S&P 500 target to 6,600, but this implies limited further upside for now [1] - The S&P 500 is moving along two parallel paths: mega-cap tech growth stocks and a more balanced part of the index [2] - Roughly half of the S&P 500's market capitalization is attached to infrastructure spending, while the other half is more susceptible to traditional economic metrics, monetary policy, and geopolitics [3][4] - Consensus estimates around 9% earnings growth for the S&P 500 this year, with half of that coming from the Mag Seven [4] Earnings Growth & Broadening - Approximately a quarter of S&P 500 constituents are projected to have negative year-over-year earnings growth this year [6] - Earnings growth acceleration is expected next year, driven by companies with negative earnings growth this year switching to positive growth [6] - A structural bull setup requires a broadening dynamic to persist into next year, beyond the mega-cap growth [11] Key Risks & Influences - The market expects the Federal Reserve to lower interest rates in the back half of the year [14] - The market is more focused on the Federal Reserve's actions, specifically Jay Powell's speech, than the Russia-Ukraine situation [13] - Geopolitical risks, such as the resolution of policy-related issues and the Iran situation, can provide a risk-on dynamic to markets [14]