Major Wall Street institutions are turning increasingly bullish on U.S. equities after volatility sparked by the Middle East conflict. Citigroup has upgraded its view on American stocks, following a similar move by BlackRock.
Citi: "Ample Upside If Ceasefire Leads to War's End"
Citigroup raised its investment rating on U.S. stocks from neutral to overweight on Monday, betting that expectations for an end to the U.S.-Iran conflict could fuel further gains.
"Under the assumption that the U.S.-Iran war will eventually be halted, we still see upside to our year-end target," Citi strategist Vita Mantey said. "There are headwinds from consumption, inflation and the Federal Reserve, but they should be manageable if the current ceasefire develops into a full end to the conflict over the coming weeks."
U.S. markets have already recovered all losses incurred since the war began. The S&P 500 closed at 6,967.38 on Monday, up 1.18% from the previous session. The index had fallen roughly 8% from 6,878.88 on February 27, before the conflict erupted, to 6,343.72 on March 30, and has since staged a steady recovery.
BlackRock issued an overweight rating on Sunday, saying "the Middle East conflict's impact on the economy is limited." The asset manager cited persistently strong corporate earnings forecasts and significantly raised its profit growth estimates for technology stocks based on expanding AI-related demand.
JPMorgan, Morgan Stanley, Goldman Sachs Also See Buying Opportunity
Other major Wall Street firms are echoing the bullish sentiment.
JPMorgan said the same day that stock market declines triggered by geopolitical shocks are likely to present buying opportunities. Morgan Stanley characterized the recent market pullback as a correction rather than the start of a prolonged bear market, favoring cyclical sectors such as financials, industrials and consumer discretionary, along with large-cap AI-related growth stocks.
Goldman Sachs had noted in early March that while short-term correction risks exist for global markets, a full-blown downtrend is unlikely.
Citigroup highlighted materials, healthcare and technology as sectors to watch. Materials has been the second-best performing S&P 500 sector this year, gaining 14%. LyondellBasell and Dow have surged 74% and 71%, respectively.
Technology stocks are down 1.4% this year, underperforming the broader market, but Nvidia and Alphabet have jumped 9% and 12%, respectively, this month alone.
