Why two Wall Street titans just turned bullish on U.S. stocks

By Barbara Kollmeyer

Citigroup and BlackRock shift back to overweight postures on U.S. equities

U.S. stocks are ready to win again, say Citigroup and BlackRock strategists.

While the human and economic costs continue to mount from now-45-day-old Iran war, the U.S. stock market has moved on.

Rising in eight of the last nine trading sessions, the S&P 500 SPX is sitting just 1.32% away from its Jan. 27 record close, hovering early this week near levels seen before the conflict began. While retail and institutional investors alike have stepped back from U.S. stocks as the conflict simmered, our call of the day flags big Wall Street U-turns from Citigroup and BlackRock.

At Citigroup, strategists are now recommending overweighting U.S. stocks, shifting from a prior neutral stance. They describe the shift as a tactical move - shelter in the highest-quality and most-defensive pockets of the equity landscape, found in the U.S. That's as they see Middle East tensions getting worse before they improve.

A team of strategists led by Beata Manthey said total damage from the U.S. and Israeli war against Iran is "likely contained" from here. Citi argued that U.S. stocks can weather the storm: "At this point, we assume a headwind to consumption, inflation and Fed rate considerations, probably manageable so long as the current cease-fire trends to a wind down of hostilities over the next several weeks."

A second reason surrounds the cracks Citi can now see in what was a hopeful narrative of cyclicals and smaller companies starting to close the earnings gap with megacap and other big-cap tech leaders.

"Instead, the EPS contribution picture is narrowing again, with most of the incremental global earnings growth now expected to come from AI- and tech-linked segments," said Citi. That's as continued outperformance of rest-of-the-world stocks versus the U.S.'s are also hitting speed bumps, due to spiking commodity prices and global-economic-growth fallout.

"With cyclicals bearing the brunt of margin pressure and earnings uncertainty, the relative story shifts back toward the U.S., where earnings growth is increasingly dominated by resilient, high-margin, AI- and tech-enabled sectors," the Citi team said.

Until macro conditions stabilize and cyclical visibility improves, the rest of the world will struggle to catch up, reinforcing what U.S. stocks have to offer.

A final reason circles back to tech. While Magnificent Seven stocks have been a "sizable drag" on U.S. equity performance this year, Citi is arguing that fundamentals remain strong. "The megacap tech cohort has seen consistent upward revisions to EPS and now trades at a meaningfully cheaper multiple vs. its history than the rest the U.S. index."

Citi targets an S&P 500 finish of 7,700 at year's end. Materials, healthcare and information technology are its sector overweights.

Elsewhere, strategists at the BlackRock Investment Institute are also now recommending overweight positioning in U.S. stocks, after turning neutral a few weeks ago at an earlier stage of the Iran conflict. A team led by Jean Boivin offered two reasons for that, and noted it's less of a shelter argument.

"First: evidence of actions that could reopen shipping traffic in the Strait of Hormuz. Second: signs that any lingering macro impact is contained. We have seen developments on both fronts," said Boivin, who is also recommending an overweighting of emerging markets.

Expectations for corporate earnings in the U.S. and emerging markets are also rising for 2026, driven by the AI theme that also helps Taiwan and South Korea, said BlackRock. In the U.S., a forecast 80% boost for chip-stock earnings this year is helping drive tech and overall earnings uplift, they say.

"Tech's valuation premium has been eroded, with the 12-month forward valuation of the U.S. IT over other sectors at its lowest level since mid-2020. At the same time, the tech sector is now seen posting earnings growth of 43% in 2026, up from 26% last year," said Boivin and his team. The team also likes thematic opportunities such as defense.

BlackRock addressed the elephant in the room - was it not overcautious in its neutral stance? The reply: that the move "cost a few percentage points at the U.S. index level - a fair price to avoid a far costlier downside scenario materializing from worsening supply disruptions."

Read: Stock traders' 'WTF indicator' is going off. Why that is a bullish sign - at least for now.

The markets

U.S. stock futures (ES00) (YM00) (NQ00) are mostly pushing higher, as oil prices (CL.1) (BRN00) slip.

   Key asset performance                                                Last       5d       1m      YTD     1y 
   S&P 500                                                              6886.24    4.15%    2.79%   0.60%   27.38% 
   Nasdaq Composite                                                     23,183.74  5.40%    3.62%   -0.25%  37.74% 
   10-year Treasury                                                     4.286      -1.40    8.30    11.40   -5.30 
   Gold                                                                 4787.6     2.38%    -4.46%  10.51%  48.37% 
   Oil                                                                  97.29      -13.60%  3.26%   69.47%  58.04% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

The U.S. and Iran are reportedly considering a reboot of failed weekend talks. Israeli talks with Lebanon are set to begin in Washington on Tuesday.

JPMorgan Chase (JPM) posted an earnings beat, but the stock is slipping on a downbeat view on net-interest income. Wells Fargo (WFC) posted a slight earnings beat. BlackRock (BLK) credited its earnings beat to a surge of money into its ETFs.

Healthcare giant Johnson & Johnson (JNJ) also lifted guidance.

United Airlines (UAL) reportedly pitched government officials on a possible merger with American Airlines (AAL), whose shares are climbing.

Producer prices rose 0.5% in March, below expectations for a 1.1% jump.

The IMF's global economic outlook is due for release at 9 a.m.

The IEA's monthly oil report showed demand dropping by 80,000 barrels per day.

Best of the web

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Saudi Arabia is pressing the U.S. to drop its Hormuz blockade.

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The chart

Energy prices shot up across the globe in March.

The chart from UBS shows how the Iran war has caused global energy inflation to spike by the most in 25 years. The bank tracked that metric for roughly 45 developed- and emerging-market economies, and found 27 saw a median March jump of 5.5%, rivaling what was seen after Russia invaded Ukraine in 2022.

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   INFY    Infosys 
   AMZN    Amazon 
   MSFT    Microsoft 
   PLTR    Palantir 
   TSM     Taiwan Semiconductor Manufacturing 
   MU      Micron 
   INTC    Intel 
   AMD     Advanced Micro Devices 

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04-14-26 0844ET