Equity strategists from the world's largest asset manager, BlackRock, have shifted their stance to "overweight" on US and emerging market equities. This change is primarily driven by their assessment that the substantial damage to global economic growth from the latest Middle East geopolitical conflict is "likely to be very manageable." BlackRock's decision to upgrade its view on US and emerging market equities from neutral to overweight is based on the partial emergence of two critical risk-appetite "signposts" it had been awaiting: signs of a resumption of shipping traffic through the Strait of Hormuz and indications that the economic impact of the war is controllable. Concurrently, the S&P 500 index has rebounded nearly 8% from its March low, nearly recouping all losses incurred after the outbreak of the Iran conflict. The Nasdaq Composite Index, which includes the world's hottest AI semiconductor stocks such as NVIDIA, Advanced Micro Devices, and Micron Technology, has completely recovered all declines since late February when the Iran conflict began.
BlackRock's strategists have also changed their stance on the stock markets of South Korea and Taiwan, which are centered on semiconductor stocks, from a previous cautious position to an "overweight" rating, representing their most bullish outlook. Regarding core investment themes, BlackRock's strategists are particularly optimistic about semiconductor stocks closely linked to AI computing infrastructure, such as leading companies in the AI computing supply chain within US, South Korean, and Taiwanese markets.
In a recent weekly investment note, BlackRock's top strategy team wrote that the damage to global growth from the new Middle East geopolitical conflict is manageable, making US equities and emerging market equities, especially those in South Korea and Taiwan, worthy of a long-term "overweight" position for investors. On current core investment themes, BlackRock asserts that technology stocks, following a pullback, appear attractive for investment. This is especially true for the semiconductor sector, where earnings expectations linked to AI computing power continue to be revised upwards. Furthermore, the combination of geopolitical fragmentation, the global trend towards AI technology development, and policies emphasizing supply chain resilience are expected to continue driving increased demand for energy independence, core infrastructure, and electrical equipment worldwide.
BlackRock's official weekly note explicitly stated that it has readjusted its stance on US equities, as well as South Korean and Taiwanese equities, and indeed its entire emerging market equity allocation, back to overweight. It emphasized that earnings growth expectations for the technology sector have risen to 43% for 2026, while earnings for the semiconductor sector as a whole are projected to surge by approximately 80% this year. Geopolitical factors and the exponentially growing global demand for AI computing power are expected to jointly drive demand for core infrastructure and power.
As the US earnings season commences, major Wall Street firms are actively expressing optimism about the equity market. With the US earnings season officially beginning this week, supported by strong profit expectations centered on AI computing infrastructure and growing market conviction that the US, Israel, Iran, and Lebanon will soon reach a long-term, stable ceasefire agreement under domestic pressure, the outlook for future stock markets from top Wall Street investment institutions, including BlackRock, Goldman Sachs, and Morgan Stanley, has become marginally more optimistic.
Michael Wilson, a well-known equity market strategist at Morgan Stanley, stated on Monday that against a backdrop of strong earnings and a sustained economic recovery, the stock market is in the "final stages" of a downward correction trajectory caused by geopolitical conflict. He also noted that risks from private credit and the impact of artificial intelligence have already been priced in by the market. Almost simultaneously, a report from Goldman Sachs' macro trading team indicated that recent signs of ceasefire and negotiation willingness from the US and Iran have diminished extreme downside tail risks, leading the market into a "new phase of the crisis" where the worst-case scenario is no longer the baseline pricing. The report emphasized that if this shock resembles an "inflation shock" more than a "growth shock," then equities still have room to price in double-digit earnings growth again. Goldman Sachs' latest client flow note showed that hedge funds shifted to net long positions last week for the first time in eight weeks, clearly betting in advance on a ceasefire and earnings resilience. Goldman Sachs suggested that a temporary ceasefire reduces the necessity for major central banks to pivot urgently but does not entirely eliminate the residual pressure for "higher rates for longer." Goldman Sachs tends to believe that the probability of Fed rate hikes is the lowest among major central banks, and the tail risk of a large-scale renewed hiking cycle has significantly weakened, suggesting interest rate volatility should continue to decline. However, the pass-through from energy to inflation is not yet complete; if oil prices cannot stabilize and fall further, front-end rates are unlikely to shift towards easing quickly. In other words, Goldman Sachs is confident that the most dangerous extreme trading scenarios are receding, and the market will now enter a phase of higher volatility but relative optimism, revolving more around the path of oil prices, inflation persistence, and the realization of earnings.
In a research report issued on Monday led by Jean Boivin, Head of the BlackRock Investment Institute, the strategists wrote that several weeks ago, following a sharp decline in global financial market risk appetite due to Middle East geopolitical conflict, which prompted the asset manager to downgrade its equity market allocation to "neutral," they had been monitoring "two key signposts for increasing risk-taking." The core signals and signs they were observing included a tendency among geopolitical actors towards restarting shipping via the Strait of Hormuz and data suggesting the war's economic impact was limited. They stated, "We have seen positive developments on both fronts." They described the recent two-week ceasefire agreement as "very important" and stated that the threshold for returning to a state of geopolitical war is "high."
As BlackRock turned decisively bullish on US and emerging market equity assets, the S&P 500 index nearly recovered all losses triggered since the Iran conflict erupted in late February. This followed significant signals from former US President Donald Trump expressing willingness to end the conflict and his agreement to a fragile temporary ceasefire last week. The latest wave of gains occurred on Monday when he directly posted on a social media platform that the Iranian side had contacted his administration regarding peace talks, despite the US having begun a naval blockade in certain areas of the Strait of Hormuz. As shown in the accompanying chart, the US stock market has nearly recouped all its March losses, with the S&P 500 experiencing significant volatility recently due to news related to the Iran conflict.
Additionally, BlackRock emphasized the upcoming US earnings season, asserting that the engine of profit growth can support the main theme of the US bull market. The strategists wrote, "Even during the geopolitical conflict, corporate earnings expectations have continued to rise, largely due to strong AI computing demand driven by AI-related investment themes." The Wall Street banking earnings season has begun and will enter a more intensive disclosure phase starting Tuesday when financial giants like JPMorgan Chase report results.
According to the latest statistics from Bloomberg Intelligence, after years of typically downgrading benchmark earnings forecasts towards the end of the quarter, Wall Street analysts are now significantly raising profit expectations, primarily driven by oil and AI semiconductor companies. The strategists stated that US and emerging market equities—which BlackRock has upgraded to overweight—offer "earnings bright spots" strongly driven by leaders in the AI computing supply chain. Regarding US and emerging market equity assets, BlackRock's strategists said, "The manageable damage to global growth from the Middle East geopolitical conflict, combined with robust earnings expectations—especially in the tech sector—leads us to anticipate a full return of risk appetite." They pointed out that "semiconductor sector earnings are expected to surge by about 80% this year," which is driving continuous upward revisions to earnings expectations for tech stocks and the overall equity market by analysts. They also noted that the core AI hardware manufacturers in the South Korean and Taiwanese equity markets "are driving upward revisions to emerging market earnings expectations."
Furthermore, Boivin and the BlackRock strategists collectively wrote, "The valuation premium for tech stocks has eroded, with the 12-month forward valuation of the US IT sector relative to other sectors falling to its lowest level since mid-2020." Previously, Torsten Slok, Chief Economist at Apollo Global Management, stated that global tech stock valuations have "declined significantly," with some even falling back to levels seen before the global AI investment boom began.
BlackRock strategists also believe that "geopolitical fragmentation is supporting the defense, aerospace, and military construction sector, pushing governments to strive harder for energy independence systems, and prompting companies to increase investment in supply chain resilience." These factors, combined with the inevitable AI mega-trend, "will collectively drive increasingly strong demand for core utility infrastructure and power infrastructure."
Last weekend, a team led by Michael Hartnett, a strategist at Bank of America often referred to as "Wall Street's most accurate strategist," released a report stating that for the broader "post-conflict trade" theme, commodities represent the structural main trade, while Chinese tech stocks and the global semiconductor sector are the tactical core offensive directions. Global consumer stocks are expected to benefit broadly from a potential "policy panic first-aid kit" that might emerge as the US government strives to avoid a US economic recession—a logic that also applies to the global consumer sector. In the view of Hartnett's Bank of America strategy team, semiconductors, consumer stocks, Chinese tech stocks, along with a steepening long-term yield curve, will be the more actionable tactical offensive trade themes with potential for excess alpha in the quarters following the conflict. Chinese tech stocks correspond to "Made in China" maintaining its lead in global manufacturing, accelerated development of frontier AI in China, continued easing of US-China trade tensions, and potential important summit windows. Semiconductors correspond to the ongoing capital expenditure arms race among AI hyperscalers (super cloud computing giants like Google, Microsoft, and Amazon); as long as they "prefer to take on debt and conduct layoffs rather than retreat in the AI capex race," the entire core semiconductor chain retains investment value. Consumer stocks are a "post-conflict best trade theme" repeatedly emphasized by Hartnett, primarily because he expects fiscal and monetary policy to lean more towards alleviating living cost pressures and avoiding a simultaneous deterioration of economic and public opinion trends.
This Wall Street financial giant cites the logic of a rebound from oversold conditions based on "earnings certainty + high beta attributes," along with continuously expanding global AI spending, as core reasons for its long-term bullish stance on semiconductor stocks. Bank of America strategists' latest forecast data suggests that, driven by accelerated growth in the global core AI computing supply chain and areas such as memory/logic chips, 2.5D/3D advanced packaging, and data center power chains, the total global semiconductor market size will reach $2 trillion by 2030, representing a compound annual growth rate of 20%. In contrast, the global semiconductor market size is less than $1 trillion until at least 2025. As model scale, inference chains, and multimodal/agentic AI workloads drive exponential expansion in computing resource consumption, the capital expenditure focus of tech giants is increasingly concentrating on AI computing infrastructure to meet surging demand. Global investors continue to anchor the "semiconductor stock bull narrative," centered on expectations for new product iterations from NVIDIA, Google's TPU clusters, AMD, and AI computing cluster deliveries, as one of the most certain cyclical investment narratives in global equity markets. This also implies that investment themes closely related to AI training/inference, such as power, liquid cooling systems, and optical interconnect supply chains, will continue to rank among the stock market's hottest investment camps, following leaders like NVIDIA, AMD, Broadcom, Taiwan Semiconductor Manufacturing Company, and Micron Technology, even amidst uncertainty in the Middle East geopolitical situation.
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