Asset management giant Blackrock has strongly upgraded its rating for U.S. stocks! Buoyed by improved corporate earnings prospects and easing geopolitical risks, the firm believes that U.S. equities are presenting an excellent allocation opportunity...
Blackrock, the asset management giant, has raised its outlook for the U.S. stock market. The firm believes that the impact of the Iran conflict has been effectively contained, and robust corporate earnings will create a favorable macro environment for the domestic U.S. equity market.
The institution, which manages $14 trillion in assets for its clients, stated in its weekly market report that it had upgraded the U.S. equities rating from 'neutral' to 'overweight'.
The evolution of the conflict had previously led Blackrock to adopt a cautious stance on the U.S. stock market. However, the firm noted that the prospect of a lasting ceasefire now leads strategists to believe that the impact of the conflict will be limited.
"After reducing risk exposure a few weeks ago, we are seeing signals to increase risk appetite again. Meanwhile, expectations for corporate earnings in the U.S. and emerging markets in 2026 continue to rise, even after the outbreak of the conflict on February 28."
Furthermore, Blackrock’s strategists stated, "The threshold for another war between the U.S. and Iran is high," further limiting potential disruptions.
Meanwhile, the outlook for corporate earnings appears highly promising.
As the earnings season gets underway, financial data firm FactSet forecasts that total profits for S&P 500 companies in the first quarter are expected to grow by 12.6%. The forecasting agency noted that this growth could reach 19% if historical outperformance trends hold.
More importantly, profits in the technology sector are expected to surge by 45% this year, yet the sector's actual performance has seen minimal gains.
Blackrock pointed out that this has driven the valuation of the information technology sector relative to the other 10 sectors of the S&P 500 down to its lowest point since mid-2020.
"Given strong corporate earnings expectations and limited cumulative damage to global economic growth, we have increased our risk exposure to the U.S. and emerging markets again," the strategists said. "During this first-quarter earnings season for U.S. stocks, we will focus on profit margins and remain optimistic about thematic investment opportunities such as defense."
These two regions are also the only two markets where Blackrock is overweight in its equity portfolio.
Moreover, JPMorgan strategist Mislav Matejka also believes that the conflict in the Middle East is unlikely to drag on indefinitely, and market declines triggered by geopolitical shocks will ultimately prove to be a rare buying opportunity. He stated that with the significant contraction in the valuation premium of the 'Magnificent Seven' US stocks, their investment appeal has now become particularly prominent.
Morgan Stanley analyst Michael Wilson pointed out that the recent sell-off in the US stock market appears more like a healthy market correction rather than the beginning of a prolonged downturn. He emphasized that after this round of adjustments, the current earnings growth prospects and overall valuations of companies have become much healthier.
Editor/Doris