Buy Tech as Geopolitical Risks Are Often Contained Says Wall Street

Despite an escalation in tensions between Iran and Israel at the start of the week, Wall Street strategists are encouraging U.S. equity investors to stay composed and seize potential buying opportunities during any market dips. This strategy gained traction after former President Donald Trump announced a ceasefire between the two countries, helping restore market confidence.

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Notable voices on Wall Street, including Paul Christopher of the Wells Fargo Investment Institute and Sam Stovall from CFRA Research, advise long-term investors to remain focused on sectors such as information technology, communication services, and financials. Meanwhile, Dennis DeBusschere of 22V Research leans toward growth-oriented and momentum stocks.

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This approach marks a shift from the traditional response to geopolitical unrest, where investors typically move into defensive sectors like utilities and health care. Instead, many strategists now believe that the conflict between Iran and Israel is unlikely to leave a lasting mark on financial markets. Tech companies, known for their robust balance sheets and substantial cash reserves, are viewed as safe havens even in times of rising geopolitical risk.

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Barclays strategist Venu Krishna summed up this sentiment during a Bloomberg TV interview on Monday. “Every time geopolitical risk flares up, markets have found a way to contain it. Investors have grown accustomed to that pattern, and we expect the same this time,” he said.

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Tech Stocks Continue to Lead as Traditional Defensives Lag

Since the outbreak of the latest Middle East tensions in mid-June, technology stocks have helped lift the S&P 500, while more defensive sectors have fallen behind. According to Bloomberg data, the S&P 500’s information technology sector rose 0.4% since June 12. Other sectors such as energy, industrials, and consumer discretionary also posted modest gains. In contrast, health care declined by 3.1%, making it the worst-performing sector during the same period.

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On Monday, the S&P 500 advanced nearly 1%, reversing an earlier decline, thanks largely to strength in tech shares. Iran’s missile strike on a U.S. base in Qatar, while headline-grabbing, was seen as largely symbolic and did not spark widespread panic in the markets.

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Michael Kantrowitz, chief investment strategist at Piper Sandler, emphasized that defensive strategies may not be suitable in this environment. “Being defensive implies expecting a market downturn — and we don’t think that’s in the cards,” he said. As long as corporate earnings projections continue to improve, 10-year Treasury yields remain under 4.5%, and crude oil stays below $85 per barrel, Kantrowitz believes equities will keep rising.

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As of Tuesday, the 10-year U.S. Treasury yield was just under 4.4%, while WTI crude oil futures dropped to as low as $64.40 per barrel, calming inflation fears.

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Bullish Outlook from Morgan Stanley

Michael Wilson, chief U.S. equity strategist at Morgan Stanley, echoed this positive outlook. He noted that recent U.S. military involvement in the Middle East is unlikely to change his team's forecast of economic and corporate earnings growth over the next six to 12 months—unless oil prices surge dramatically.

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Still, some investors are approaching tech stocks with caution. Following a strong recovery in the broader market after the tariff-driven downturn earlier this year, technology names have once again led the rally. However, their valuations are creeping back toward levels last seen before the March-April selloff.

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Joe Gilbert, a portfolio manager at Integrity Asset Management, is wary of the stretched price-to-earnings ratios in the tech sector. He’s turning his attention instead to industrials and financials, which offer more attractive valuations and still hold promise for earnings expansion.

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Currently, the S&P 500 Information Technology Index trades at around 28 times forward earnings. In comparison, the industrials sector is priced at 23 times earnings, and financials come in even lower at 17 times.

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“The tech trade is getting crowded, and that’s a concern,” said Gilbert, noting the potential for diminished returns if too many investors crowd into the same space.

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Mega-Cap Tech: Growth and Safety in One

Despite valuation concerns, large-cap technology firms still enjoy a reputation as defensive plays with strong growth characteristics. Their dominant market positions, substantial cash flows, and low debt levels make them appealing to investors during uncertain times.

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Michael O’Rourke, chief market strategist at Jonestrading, explained that over the past decade, mega-cap tech has served as a dual-purpose investment during crises. “These firms operate like monopolies, generate reliable cash flows, and maintain minimal debt. That kind of strength becomes a safe harbor in turbulent waters,” he said.

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As the market moves past the immediate threat of further Middle East escalation, strategists are encouraging investors to keep their focus on long-term fundamentals and resist the urge to react emotionally to geopolitical shocks. With tech leading the charge and broader economic indicators remaining supportive, many believe the bull case for stocks remains intact.

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