Citigroup Inc. has downgraded its recommendation for U.S. stocks to 'neutral' from 'overweight', citing weakening economic momentum and the impact of President Trump's tariffs and spending cuts. This adjustment reflects concerns over the U.S. economy's ability to outpace global markets in the coming months. Simultaneously, Citi has upgraded its outlook on Chinese stocks to 'overweight' from 'neutral', driven by positive economic signals from China's Government Work Report and an increased flow of funds into Chinese equities. The bank's economists have revised their forecast for Chinese GDP growth from 4.5% to 4.7% this year, attributing the upgrade partly to a boost from investment in artificial intelligence. Citi's strategists, led by Dirk Willer, highlighted two recent price signals contributing to the downgrade of U.S. stocks: the S&P 500 falling below its 200-day moving average and the underperformance of market-leading stocks. The Nasdaq experienced a significant drop, losing 4% in its steepest one-day decline since 2022, while the S&P 500 fell 2.7%, marking its largest daily drop of the year. The bank's positive stance on China is supported by advancements in the country's technology sector, particularly in artificial intelligence, with companies like DeepSeek, Tencent, and Alibaba making notable progress. Despite the risk of tariffs, Citi sees potential for a resolution in trade discussions with China, which could further enhance the attractiveness of Chinese stocks. President Xi Jinping's support for the technology sector has also been noted as a factor in this optimistic outlook.