Name: We're not afraid of software, semiconductor stocks: Citi's Pettit
Uploaded: 2026-01-05T21:48:14+00:00
Duration: 230 s

Speakers

Drew Pettit — Research Director of U.S. Equity Strategy and ETF Strategy, Citi

Barry Knapp — Managing Partner, Ironsides Macroeconomics

Summary

CNBC's Closing Bell Overtime discusses markets shrugging off the Venezuela geopolitical shock, with the Dow at record highs and energy stocks up. Citi's Drew Pettit says the S&P 500 fundamental premise remains intact and favors inflecting-growth cyclicals/financials plus tech companies earning high returns on growth capex. Ironsides' Barry Knapp calls Venezuela a nonevent for equities, points to the run-it-hot and 2026 broadening theme, and warns heavy debt supply, partly for AI infrastructure, could cause back-end Treasury problems.

Markets rallied despite the U.S. capture of Venezuela's Nicolas Maduro; the Dow hit record highs.
Energy stocks rose on bets on Venezuelan oil infrastructure rebuilding and limited broader fallout.
Drew Pettit said cross-asset implied volatility stayed low, so the equity reaction was fine and the S&P 500 premise was unchanged.
Pettit favors inflecting-growth cyclicals/financials and tech companies with high returns on growth capex.
Barry Knapp called Venezuela a nonevent for equities; he sees focus on the run-it-hot and 2026 broadening theme.
Knapp said a weaker ISM drove a belly Treasury rally and raised Fed stimulus expectations.
Knapp warned AI infrastructure financing and heavy IG supply could create back-end Treasury problems like 2018.

Ideas

Drew Pettit Research Director of U.S. Equity Strategy and ETF Strategy, Citi 1:21

S&P 500 fundamentals intact; risk assets favorable.

The Venezuela raid did not produce a spike in cross-asset implied volatility across rates, oil, or the dollar, so the equity reaction is fine and does not change the fundamental premise for the S&P 500; with fundamentals intact and macro stable, this is a good environment for risk assets.

Barry Knapp Managing Partner, Ironsides Macroeconomics 1:53

Run-it-hot broadening supports equities.

The Venezuelan situation was a nonevent for equities, and the market is focused on the 'run it hot' thesis that growth will reaccelerate and broaden in 2026; a weaker ISM supports Fed stimulus, and investors are willing to give the broadening-out theme the benefit of the doubt.

Barry Knapp Managing Partner, Ironsides Macroeconomics 2:19

Weak ISM supports Treasury belly rally.

A weaker-than-expected ISM survey drove a rally in the belly of the Treasury curve and increased expectations that the Fed will provide more rate-policy stimulus, making the belly a developing rate-cut setup.

Barry Knapp Managing Partner, Ironsides Macroeconomics 2:38

Long-end Treasury supply risk rising.

If the economy runs hot, financing the AI infrastructure buildout and heavy investment-grade supply could create supply problems in the back end of the Treasury market, similar to 2018, making long-dated Treasuries risky.

Drew Pettit Research Director of U.S. Equity Strategy and ETF Strategy, Citi 3:33

Cyclicals poised for earnings inflection.

Under Fed cuts and an equity soft landing, many companies that have not had earnings growth for years, including a broad set of cyclicals and not just small caps, should move from negative to positive earnings growth, supporting an inflecting-growth trade.

Drew Pettit Research Director of U.S. Equity Strategy and ETF Strategy, Citi 3:40

Financials benefit from earnings inflection.

Fed cuts plus a soft landing should drive an earnings inflection in laggard cyclicals, and financials are a good way to play that inflecting-growth theme.

Drew Pettit Research Director of U.S. Equity Strategy and ETF Strategy, Citi 3:48

Tech offers high growth-capex returns.

He wants to own companies that are generating high returns on their growth capex, and tech fits that criterion.

We're not afraid of software, semiconductor stocks: Citi's Pettit

Summary

Ideas

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