Citigroup upgraded US equities to “overweight” from their earlier rating of “neutral” on a quality / defensive tilt in their global allocation. On the flip side, they have downgraded emerging market stocks to “neutral” from “overweight”, citing their vulnerability to energy stocks and a stronger US Dollar.
Similar calls were also issued at BlackRock and Morgan Stanley recently citing the resilience of the market even during the war. The S&P 500 erased all of its losses of the year on Monday and turned positive for 2026 on hopes of a resolution to the West Asia conflict.
Given the limited visibility, Citigroup has called the upgrade “tactical”. They expect the S&P 500 to reach levels of 7,700 by the end of the year, implying an upside potential of 12% from current levels.
Citigroup have upgraded global materials to “overweight” and downgraded the communications sector to “underweight” They also highlighted that the technology sector’s growing heft over global earnings growth complicates the equity outlook along with the war.
However, the brokerage also said that an eventual peace deal between the US and Iran will lift investor sentiment, a return to the “goldilocks” macro and pro-cyclical trading dynamics “may prove difficult.”
