Citigroup has joined the Wall Street bullish camp, upgrading its US stock rating while simultaneously downgrading emerging market ratings. This adjustment reflects a divergence between resilient tech earnings and persistent energy shock risks.
On Monday, Citigroup upgraded its US stock rating from &#34;Neutral&#34; to &#34;Overweight,&#34; based on three key considerations: valuations have become more attractive following recent pullbacks; the contribution of tech stocks to global earnings growth continues to expand, with an expectation that they will account for roughly half of global earnings growth; and expectations of eased tensions in the Middle East have partially reduced tail risks of oil-driven inflation.
The S&amp;P 500 has rebounded nearly 9% from its seven-month low at the end of March. Citigroup strategists noted that after repricing, the premium of US stocks relative to developed markets outside the US is close to historical averages, enhancing their valuation attractiveness. On the same day, BlackRock Investment Institute also upgraded its US stock rating, with multiple institutions expressing a preference for US equities over similar assets globally.
In contrast, Citigroup downgraded its emerging market equity rating to &#34;Neutral&#34; and issued an &#34;Underweight&#34; rating for the global communication services sector. Persistent energy shock risks continue to suppress emerging market performance, becoming a key factor in this rating adjustment.
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<h2>Tech Sector Dominates Global Earnings Growth</h2>
The research report emphasizes that although earnings per share across all global industries are expected to grow in 2026, approximately 50% of the incremental growth is projected to come from the technology sector. This highly concentrated earnings structure is the core logic behind the bullish view on US stocks—the rising weight of US tech companies in global earnings growth gives US equities a structural advantage in global allocation.
At the same time, emerging market stock ratings were downgraded to &#34;Neutral.&#34; The report notes that many emerging market economies are highly sensitive to physical energy shortages, and war in Iran has pushed up oil prices, exacerbating inflation pressures in energy-importing countries, worsening external accounts, and increasing the risk of capital outflows. Since the outbreak of the conflict, the MSCI Emerging Markets Index has fallen cumulatively by 2.8%.
A stronger dollar further amplifies these pressures, adding extra headwinds for emerging market assets. Notably, the year-end target for the MSCI Emerging Markets Index was raised from 1540 to 1770, indicating that the medium-term outlook for emerging markets is not broadly pessimistic, though short-term risk factors remain dominant.
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Citigroup upgraded its US stock rating to "Overweight," primarily driven by resilient tech earnings, reasonable valuations, and easing tensions in the Middle East. Tech stocks are expected to contribute approximately 50% of global earnings growth. Meanwhile, Citigroup downgraded emerging market equities to "Neutral" as persistent energy shock risks continue to weigh on performance. Despite short-term risks, the MSCI Emerging Markets index year-end target was raised to 1770, indicating that the medium-term outlook is not pessimistic

- Citigroup has upgraded its rating on U.S. stocks to "Overweight" while downgrading emerging markets to "Neutral," citing the resilience of technology earnings and risks from energy shocks.  
- The upgrade is based on improved valuations, the increasing contribution of technology stocks to global earnings, and expectations of reduced inflation risks due to easing tensions in the Middle East, with the S&P 500 rebounding nearly 9% since late March.  
- In contrast, ongoing energy shock risks are suppressing emerging market performance, prompting Citigroup's downgrade, though the MSCI Emerging Markets Index's year-end target has been raised, suggesting a tempered long-term outlook.

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Citigroup Turns Bullish on US Stocks: Tech Leads Earnings Growth, Valuation Attractiveness Rises After Pullback