Will the stock market style undergo a significant shift amid the current volatility? According to Citigroup, the growth theme is poised to "maintain its dominance" in 2025.

Citi released a thematic investment strategy report on the US stock market, highlighting that growth themes still performed strongly despite the market facing various risks. Citi emphasized that growth themes would continue to lead the market in 2025. Citi noted that US stocks experienced significant volatility in January due to high interest rates, doubts about massive AI investments, and tariff issues. However, US stock indices still rose slightly overall. On the surface, these risks seem to have indeed led to a shift in market style. The Nasdaq 100 lagged the S&P 500, and the Russell 1000 was leading growth stocks. However, by observing market behavior at the stock and theme levels, Citi found that growth stocks actually performed well. On an equal-weight basis, US growth stocks outperformed value stocks, and growth themes outperformed cyclical and defensive themes. The size-weighted indicators performed differently due to the influence of the seven major tech giants. Citi expects market volatility this year and even in the first half due to macroeconomic and policy uncertainties. To cope with market volatility, Citi advocates a balanced allocation, combining growth themes with cyclical and defensive themes. Despite market volatility, Citi's thematic portfolio (Thematic30) performed well overall. Citi adjusted its thematic portfolio by replacing Edison International (EIX.US) with Republic Services (RSG.US). Citi believes Republic Services' ROE is expected to improve in the next two years, and its low market beta is conducive to coping with ongoing market volatility. Although Edison International suffered losses from the wildfires in Los Angeles, Citi still rates the stock "buy." Overall, Citi recommends investors maintain a balanced allocation of growth, cyclical, and defensive themes to cope with various risks in the first half. Citi also advises investors to be patient and focus on incremental alpha opportunities rather than pursuing more diversified investment styles before the market outlook becomes clear.