Citi’s Kate Moore Sees Safety in US Large Cap Stocks
Summary
- U.S. large caps are demonstrating resilience during recent geopolitical/economic shocks due to lighter positioning and higher fundamental quality.
- Small caps and non-U.S. equities are highly vulnerable, having rallied in 2025 primarily on multiple expansion rather than underlying earnings growth.
- Mega-cap Technology and Communication Services offer a "safe haven" profile, as investors have already de-risked these sectors and they possess sustainable earnings momentum.
- Industrial metals, specifically copper, present a strong secular growth opportunity driven by AI infrastructure and CapEx build-outs, despite near-term cyclical price volatility.
Trade Ideas
The U.S. large cap space, the S&P 500, which has been treading water for six months, is holding up relatively well because people had already taken down a little bit of their exposure there. And it's frankly, a higher quality part of the market. When geopolitical or economic shocks occur, capital flees speculative assets and seeks safety in liquid, high-quality balance sheets. Because investors had already reduced their S&P 500 exposure prior to the shock, the market is structurally insulated from panic selling. Go long U.S. large caps as they serve as the safest vehicle within risk assets during periods of macro uncertainty. A severe, prolonged recession could eventually drag down large cap earnings, overriding the current positioning advantage.
You saw the biggest move so far in the small cap space, in non-U.S. equities, places where there was a significant move over the course of 2025. Much of it driven by multiple expansion and not earnings. Assets that appreciate purely because investors are willing to pay higher valuation multiples (rather than because the companies are making more money) are the first to collapse during a risk-off event. Without an earnings floor, small caps and international stocks will face severe multiple compression. Avoid small capitalization and international equities until valuations reset to match their actual earnings power. Central banks could inject massive liquidity, which typically disproportionately benefits lower-quality, high-beta assets like small caps.
People were taking down some of the risk in some of the secular growers. I think those still offer better quality and frankly, better likelihood of being able to sustain their earnings momentum even in more kind of a geopolitical and economic shock environment. The market previously sold off Tech and Communication Services due to fears over AI CapEx sustainability and high concentration. This de-risking created an attractive entry point for companies that have monopolistic moats and the ability to generate cash flow regardless of the broader economic cycle. Long the Tech and Comm Services sectors as defensive growth plays with washed-out positioning. Regulatory crackdowns or a sudden halt in enterprise AI spending could directly impact the earnings momentum of these mega-caps.
There is consistent demand for industrial metals. We've talked, of course, about copper and other things going into the AI build out and CapEx story. The physical build-out of data centers and power grids required for artificial intelligence creates a structural, price-inelastic demand for copper. This secular tailwind will overpower short-term cyclical price volatility in the commodities market, benefiting both the physical metal and the miners who extract it. Long copper and major copper producers to capture the physical layer of the AI infrastructure boom. A severe global manufacturing recession could temporarily crush industrial metal prices before the long-term AI demand fully materializes.
Up Next
This Bloomberg Markets video, published March 09, 2026, features Kate Moore discussing SPY, IWM, VXUS, XLK, XLC, CPER, FCX, TECK. 4 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Kate Moore · Tickers: SPY, IWM, VXUS, XLK, XLC, CPER, FCX, TECK