Citi’s Drew Pettit believes the Federal Reserve is still likely to cut rates in December, despite market odds declining. According to Pettit, Citi’s “house view” anticipates a rate reduction driven by mild economic weakness, not recession signals. These “insurance cuts” are expected to fine-tune monetary policy and provide support to global markets.

For India, Pettit noted that earnings and fundamentals remain strong, but valuations are currently full, prompting Citi to move the country from overweight to market weight. On artificial intelligence (AI), he clarified that investors are seeking “AI at a better price” rather than avoiding the sector, with opportunities emerging in China, select international markets, and pockets of the U.S., though India is not part of this rotation yet. Pettit dismissed concerns of an AI bubble, calling the current trend a boom, with rational profit-taking and buying on pullbacks.

Looking ahead to 2026, Pettit expects global equities to benefit as cyclicals and traditional sectors begin contributing more meaningfully. While mega-cap growth stocks will continue to influence indices, he highlighted that broader participation across sectors could support a healthier and more balanced market performance.