Citigroup’s investment research division has identified three key sectors of the stock market that investors should focus on in the upcoming year. The sectors highlighted are information technology, financials, and healthcare, with the firm suggesting a bullish outlook as 2026 approaches.
The report emphasized that, in 2025, the information technology and healthcare sectors have exceeded expectations, posting year-to-date gains of 28% and 17%, respectively. In contrast, the financials sector has lagged behind the broader market, experiencing a modest increase of 6% since January. Notably, Citigroup noted that its sector selection strategy for 2025, centered on a Growth cluster combined with a Cyclical barbell approach, outperformed the S&P 500 by more than four percentage points.
As the financial landscape evolves, Citigroup asserts that the balance of investments should shift toward more defensively positioned sectors. They anticipate a fundamental broadening that could influence market dynamics positively in 2026.
### Financials
Citi’s analysis suggests that the financial sector is poised for growth, particularly among banks and financial services. They noted that profit margins remain robust, with promising trading signals emerging from the sector. Their assessment includes a positive Relative Strength Index reading, indicating that these investments are poised for upward movement. The bank has provided a list of top stock picks for this sector.
### Healthcare
The healthcare sector is expected to benefit from a decrease in policy uncertainties, particularly concerning drug pricing, as pharmaceutical companies navigate agreements with the current administration. Citi highlighted positive revisions in growth forecasts for the upcoming year, particularly in healthcare equipment and services. Insider trading activity has also shown an uptick in purchases while recent sales have seen a decline. This supportive environment is expected to enhance investor sentiment moving forward.
### Information Technology
Within the information technology sector, Citigroup’s researchers expressed confidence in the fundamentals driving growth. They identified the semiconductor segment as particularly promising, with favorable growth dynamics and positive revisions in earnings across software and services. The firm indicated that while valuations may appear stretched in some areas, the overall growth setup remains attractive, positioning this sector as a favored choice.
Overall, Citigroup’s latest analysis provides a strategic framework for investors looking to navigate the evolving market landscape in 2026, suggesting that positioning in these key sectors could yield beneficial outcomes. The bank’s research continues to emphasize a balanced approach, integrating both growth and defensive strategies to optimize investment returns.
