Earnings will be strong this year supported by secular economic trends, says Citi's Drew Pettit

• Earnings are expected to be strong this year, supported by secular economic trends, despite conflict and messiness in Washington and around the Fed.
• Favors semiconductors (NVIDIA, Micron, Teradyne) as a growth story, not cyclical, driven by AI buildout and supply constraints, where margins are expanding and sales grow faster than assets.
• Highlights a 'narrow path higher' for the market due to elevated growth expectations, stretched valuations, and narrow leadership, with cyclicals facing challenges in passing through higher costs.
• Recommends pairing secular winners with bottoming cyclicals that can endure negative revisions, and owning higher growth names potentially hurt by AI disruption or geopolitical sell-offs.

Citi's Drew Pettit sees a positive end to the week driven by strong earnings expectations, especially in secular growth areas like semiconductors due to AI buildout. He notes a divergence where tech can pass through costs, unlike some cyclicals and defense names, leading to a 'narrow path higher' for the broader market.