Citigroup said it saw three areas of the market where investors should pile into next year.
The bank's research arm said it was overweight on financials, healthcare, and info tech.
The bank also issued a list of top stock picks in each area.
The investing playbook to follow in the new year homes in on three key sectors of the stock market, according to Citigroup.
The bank's investment research arm unveiled its list of sector calls heading into the first quarter of 2026, which included three areas it believes investors should be overweight in as the new year begins: Information technology, financials, and healthcare.
Besides financials, those sectors have seen a stellar performance in 2025. The healthcare sector of the S&P 500 is up 17% for the year, while technology stocks are up 28% year-to-date, beating the benchmark index. The financials sector has lagged the broader market, up 6% since January.
"For most of '25, we led with a Growth cluster focus while frequently advocating a Cyclical barbell," the bank wrote of its portfolio based on its 2025 sector picks, which outperformed the S&P 500 by over four percentage points. "Headed into '26, we focus on a better balance with Defensives. This is aligned with our expectations for fundamental broadening," it said of its outlook for the coming year.
Here are Citi's areas of focus heading into the new year, followed by its top stock picks for each sector.
FinancialsVisa planned to layoff around 1,400 people by the end of the year, The Wall Street Journal reported.
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Thesis: Earnings growth among banks and financial services stocks appears to be holding strong heading into 2026.
For bank stocks in particular, profit margins look "healthy," and the sector is flashing positive trading signals, Citi said. The bank pointed to the sector's positive Relative Strength Index reading, one gauge that measures whether an investment is overbought or oversold.
Thesis: The bank said it expects "lessening policy overhang" to boost investor sentiment across healthcare, referring to trends like uncertainty around drug pricing fading as more pharma companies make deals with the Trump administration.
"Revisions have turned positive and the growth outlook for '26 should begin to improve," the bank said of the healthcare equipment & services area in particular. "Insiders have stepped up purchases while sells have declined off recent peak."
Information TechnologyOracle office in Santa Monica, California
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Thesis: Fundamentals across the information technology sector look strong, Citi researchers said, pointing to an "attractive" growth setup in the semiconductors space and positive earnings revisions in the software & services area.
"This is our preferred growth sector given good fundamental trends and revisions. Surprisingly, not all valuation reads are stretched," the bank wrote.