Citi equity strategists are advising investors to expect pullbacks in the US equity market and to consider capitalizing on these opportunities amid prevailing overbought conditions.

According to Citi’s analysis, 19 out of 24 industry groups are currently at or near overbought readings. The strategists foresee a broadening of the rally beyond the influence of mega-cap growth, and they advocate a barbell approach based on this expectation.

“A broadening playbook is justified on many fundamental, sentiment and trading inputs,” the strategists wrote in a note.

Their preferred clusters include growth and cyclicals, with a continued Overweight stance on tech and industrials. In terms of sector allocation, banks are upgraded to Overweight due to attractive valuations and robust fundamentals.

Similarly, retail and durables also move to Overweight, with the possibility that consumer concerns are already priced in. However, consumer services and autos are categorized as Underweight.

In response to notable interest rate relief, real estate is downgraded to Market Weight. The overall sentiment suggests a soft landing, underscoring market dynamics heading into the year's end.

“The implication is to expect volatility ahead, but with an eventual Fed pivot as a north star,” the strategists added.

“In aggregate, the message is to expect pullbacks and look to buy into them,” they concluded.