The BlackRock Investment Institute has cut its stance on US equities to overweight.
In its latest weekly commentary, BlackRock writes quotes resilient corporate profits and limited economic impact from the geopolitical tensions in the Middle East.
“We are going overweight. The limited damage to global growth as a result of the conflict in the Middle East and strong earnings expectations – especially in the technology sector – ensure that we continue to take risks.”
The analysts also point to economic incentives for de-escalation of the US-Iran conflict, suggesting US stocks are likely to outperform even if broader market returns prove modest.
The institute believes that emerging market (EM) equities and defense-related themes remain attractive opportunities.
“We see evidence of economic incentives to end the US-Iran conflict. We are on moderately positive risks and like US equities as a relative preference, seeing them hold up better even if absolute performance disappoints. We are also overweight emerging equities and still favor thematic opportunities such as defense.”
The move reverses March’s move from overweight to neutral in U.S. stocks, which was driven by market volatility and concerns that higher interest rates could weigh on equities, especially small caps.
Over a six-to-12-month period, the institute continues to favor AI infrastructure and equipment suppliers, noting that “electrotechnical” components such as batteries, power electronics and electric motors are poised to benefit from rising electricity demand and supply constraints.
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