Market environment allows Fed to ease with a softening labor market, says Citi's Rob Rowe

• Citi Research is 'overweight' on equities, projecting the S&P 500 to reach 7700 by year-end, supported by $320 earnings.
• AI advances are expected to significantly boost productivity over the next 3-5 years, already outpacing the internet innovation era's contribution to GDP.
• A softening labor market and tamed inflation are anticipated to allow the Fed to implement at least three rate cuts in the second half of the year.
• Key sector picks include Tech, Communication Services, Financials, and Health Care.
• Gold prices are seen as related to dollar cheapness and fiscal deficits, likely to hold current levels rather than rise significantly.

Rob Rowe of Citi Research maintains a very bullish outlook on equities, driven by a 'Goldilocks' macro picture, AI-led productivity gains, and an expectation that the Fed will ease rates in the second half due to a softening labor market and tamed inflation. He projects the S&P 500 to reach 7700 by year-end.