Even as global markets grapple with volatility triggered by the Iran war and sharp swings in oil prices, a growing number of brokerages and asset managers are turning constructive on US equities.
Analysts point to resilient corporate earnings, improving valuations after recent corrections and the outsized role of technology companies in driving global profit growth as key reasons behind the shift in sentiment.
The renewed optimism comes as the benchmark S&P 500 has rebounded nearly 9% from a seven-month low in late March, supported by expectations that geopolitical tensions in the Middle East could ease and limit the risk of a prolonged energy-driven inflation shock.
Citi upgrades US equities, flags tech-led earnings growth
Citigroup has joined the chorus of bullish calls, upgrading US equities to “Overweight” from a “Neutral” rating in a note late Monday.
The brokerage said recent market corrections have improved valuations, even as earnings growth dynamics continue to favour US markets.
“The (US) market has derated and now trades at a premium to developed markets, excluding the US; that’s close to historical averages,” Citi strategists said in a note on Monday, highlighting that global earnings growth is increasingly concentrated in technology.
According to Citi, while all global sectors are expected to see earnings-per-share rise in 2026, about 50% of that increase is expected to come from the tech sector alone.
This concentration underscores the strategic advantage of US markets, where technology companies dominate benchmark indices.
At the same time, Citi downgraded emerging market equities to “Neutral”, warning that many economies remain exposed to energy shocks and currency pressures.
The MSCI Emerging Markets index has declined 2.8% since the conflict began, reflecting concerns over inflation, capital outflows and deteriorating external balances in energy-importing nations.
However, Citi raised its year-end target for the MSCI EM index to 1,770 from 1,540, suggesting a more balanced medium-term outlook despite near-term headwinds.
BlackRock echoes optimism, cites limited macro damage
BlackRock Investment Institute has also adopted a more positive stance, upgrading US equities to overweight from neutral.
The asset manager said improving clarity on the geopolitical front and stronger earnings expectations have created a favourable backdrop for risk assets.
“We saw two signposts that would lead us to re-up risk after reducing it a few weeks ago. First, tangible evidence of actions that would reopen flows through the Strait of Hormuz. And second, visibility on the lingering macro impact being contained,” the firm said.
This comes as expectations for corporate earnings have climbed for both the US and [emerging markets] for 2026 – even since the conflict began on Feb. 28.
The firm also noted that “the threshold for the US and Iran to go back to war is high,” limiting the potential for further economic disruption.
The asset manager continues to favour US equities alongside emerging markets, making them the only overweight regions in its portfolio allocation.
Earnings outlook underpins bullish stance
The positive outlook is closely tied to expectations of strong corporate earnings growth.
S&P 500 companies are projected to deliver a 12.6% increase in first-quarter profits, according to FactSet.
If historical trends of earnings beats persist, that growth could rise to 19%.
Technology remains a key driver, with profits in the sector expected to grow 45% this year.
Despite this, the sector has seen only modest gains so far, leaving valuations relatively attractive.
BlackRock noted that the valuation of information technology relative to other sectors is at its lowest level since mid-2020.
“We re-up risk in the US and EM due to strong corporate earnings expectations and limited accrued damage to global growth,” the strategists said, adding that they continue to focus on profit margins during the ongoing earnings season.
Sector rotation and global positioning
Beyond regional allocations, Citi also highlighted shifting sector preferences.
The brokerage upgraded the global materials sector to “Overweight”, citing improving earnings momentum and attractive valuations, while downgrading communication services to “Underweight”.
The broader message from Wall Street is that while geopolitical risks remain elevated, markets are increasingly looking through near-term volatility and focusing on underlying fundamentals.
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