Citigroup Upgrades Us Equities as Tech Strength and Earnings Outlook Soothe Mideast War Woes

Citigroup has turned bullish on U.S. equities, joining a flurry of brokerages betting on resilient corporate earnings, attractive valuations following recent pullbacks, and the rising contribution of U.S. technology stocks to global earnings growth.

The Wall Street brokerage upgraded U.S. equities to "Overweight" from a "Neutral" rating in a note late Monday. The benchmark S&P 500 .SPX has rebounded nearly 9% from a seven-month low in late March, on optimism that the Middle East conflict could ease and reduce the risk of an oil‑driven inflation shock.

Some Wall Street brokerages and research houses- including BlackRock Investment Institute, which upgraded U.S. equities on Monday, have echoed similar views, favoring U.S. stocks over their global peers.

"The (U.S.) market has derated and now trades at a premium to developed markets, excluding the U.S.; that’s close to historical averages," Citi strategists said in a note on Monday, just as global earnings growth is narrowing and tilting more heavily toward technology.

While all global sectors are expected to see earnings-per-share rise in 2026, about 50% of that increase is expected to come from the tech sector alone, Citi said.

The brokerage, however, downgraded emerging market equities to a "Neutral" rating, flagging that many EMs remain highly vulnerable to physical energy shortages, with headwinds potentially compounded by the greenback's strength.

Emerging market assets have come under renewed pressure as the war involving Iran drives oil prices higher, stoking concerns about inflation, deteriorating external balances, and capital outflows in energy-importing economies, with the MSCI Emerging Markets index .MSCIEF down 2.8% since the conflict began.

Citi also upgraded its year-end target of the MSCI EM index to 1,770 from 1,540 earlier.

The brokerage also upgraded the global materials sector to "Overweight", saying improving earnings momentum and stronger growth prospects have lifted its appeal, while it remains cheap. It downgraded the global communication services sector to "Underweight".