BlackRock has upgraded U.S. equities to “overweight,” joining other major Wall Street firms in arguing that strong corporate earnings can help cushion the market against the economic fallout from the Middle East conflict. The BlackRock Investment Institute raised its view on U.S. stocks from “neutral,” citing resilient profit expectations and what it sees as limited damage to global growth even if oil prices remain elevated. The move adds to a growing sense among large financial institutions that recent market weakness may be more of a buying opportunity than the start of a deeper downturn.
The background to this shift is a market that has been jolted by war, oil volatility, and inflation fears, yet has held up better than many expected. The S&P 500 has rebounded nearly 8% from the seven-month low it hit in late March, when worries about a closure of the Strait of Hormuz and a resulting surge in oil prices weighed heavily on investor sentiment. On April 13, the index edged higher again as investors looked past the failure of weekend U.S.-Iran talks to produce a deal and focused instead on the start of earnings season. That rebound has encouraged strategists to argue that markets are adapting to the geopolitical shock rather than collapsing under it.
A major reason for the optimism is the continued strength of earnings expectations, especially in technology. BlackRock pointed to strong corporate profit forecasts and argued that the technology sector now appears set to post 43% earnings growth in 2026, up from 26% last year. Jean Boivin, head of the BlackRock Investment Institute, said the sector’s valuation premium has also come down, which makes U.S. stocks look more attractive than before. That combination of lower relative valuations and stronger expected profits is central to BlackRock’s more bullish stance.
Other major firms are making a similar argument. Apparently, JPMorgan strategist Mislav Matejka told clients that any additional escalation in the Middle East is unlikely to last indefinitely and that dips caused by geopolitical shocks should ultimately be buying opportunities. Morgan Stanley strategist Michael Wilson also said the recent selloff looked more like a correction than the start of a prolonged downturn, pointing to healthier valuations and improving earnings growth. In other words, several influential Wall Street voices are converging around the same idea: markets may stay volatile, but the underlying earnings picture is still strong enough to support stocks.
Part of that case rests on how much the biggest U.S. tech companies have already repriced. The forward price-to-earnings ratio of the so-called Magnificent Seven stocks has fallen sharply, with their valuation premium versus the broader S&P 500 dropping to 1.2 times from 1.7 times. That matters because these companies have been central to market performance over the past two years. If their valuations are no longer as stretched while profit growth remains strong, strategists see more room for upside than before. Morgan Stanley also said it continues to favor cyclical sectors such as financials, industrials, and consumer discretionary, along with quality growth stocks such as AI hyperscalers.
First-quarter S&P 500 profit growth is now expected to be 13.9%, up from 12.7% before the conflict began. That increase is striking because it suggests analysts have become more optimistic even as geopolitical risks intensified. BlackRock also upgraded emerging market stocks, again citing strong earnings. Goldman Sachs had already signaled a similar view in March, warning of near-term correction risks but saying there was little room for a full bear market.
Overall, Wall Street is trying to separate short-term geopolitical fear from longer-term earnings power. The Middle East conflict is still a real risk, especially through oil prices and inflation, but many large investment firms now believe resilient profits — led by technology — can keep U.S. stocks supported. The real test will be whether companies deliver results and guidance strong enough to justify that optimism.
