Investing.com - The negative sentiment towards U.S. assets is at an "extreme" as a lack of clarity surrounds the broader economic outlook, Citi analysts said.
In a note to clients citing discussions with national authorities and international organizations at last week’s International Monetary Fund-World Bank annual meetings, the analysts said "uncertainty" was the most utilized buzzword.
Global finance leaders met in Washington for the key gathering, with many hoping to glean more insight into U.S. President Donald Trump’s aggressive tariff policy and how it could impact the global economy.
"Indeed, we sense the mood among investors in DC was sour with respect to U.S. assets," the Citi analysts said. "Most investors seem to be expecting a recession as a result of the tariff war and associated uncertainty."
They added that skepticism surrounded U.S. growth estimates, as well as "overly optimistic" expectations for cost cuts.
"Given their fiscal concerns, investors were broadly in the steepener/pay U.S. backend camp, and also were positioned for a weaker U.S. dollar," the Citi strategists wrote.
However, they said while they share some of these worries, "negative sentiment with the U.S. at the IMF has been extreme." The Citi analysts noted that the Trump administration is "clearly in an all-out negotiation mode on tariffs," predicting that the White House is likely to secure deals with the U.K., India, Saudi Arabia, Japan, Vietnam, and South Korea.
These agreements could lower tariff worries, they argued. More progress with China -- the central target of Trump’s tariff agenda -- may also aid sentiment, the analysts said.
"Given the scope for deal-making, both consensus steepeners and U.S. dollar shorts have some squeeze risk," they said.