1. Risk-on again!

Goldman’s panic index closed the week at 9.2, above the 9 mark that has historically flagged a buying opportunity.
“The correction in the S&P 500 is likely nearing an end, and stocks could be setting up for a year-end rally, according to Morgan Stanley. Rather than waiting for a perfect low, we recommend adding exposure over the next few weeks to quality cyclicals that have de-rated materially and are exhibiting strong EPS.”
JPMorgan said that the selloff is nearing exhaustion, while Panmure Liberum thinks there may be further to go. Last week’s sharp de-rating “may have flushed the immediate election reaction, but “clearing” is not automatically the low,” he wrote.

Below: “Within AI, Semis remain our preferred exposure. The underperformance has been extreme with a number of Semis down 20-60% from their highs.”

2. Citi Strategists reduce US Stocks and upgrade Europe after AI turmoil.

Citi strategists are taking a more defensive stance, downgrading US equities and global tech while upgrading Europe as crowded positioning, slowing earnings growth and uncertainty around AI spending leave markets vulnerable to further near-term volatility.

European earnings growth has accelerated to +28%, adding to signs of a stronger-than-expected reporting season.
“AI adoption is key to the outlook for European equities given the region's relatively higher skew to 'pure' AI adopters at >60% of MSCI Europe.
36% of MSCI Europe corporates have quantified some form of AI adoption over the past 12M, up from 21% a year ago. Banks, Tech Hardware, & DivFins have the highest skew to AI adoption in the past 12M.

Below: Leading European “AI adopters” have shown strong EPS growth over the past 12M, outperforming their respective sectors.

3. Morgan Stanley expects European utilities to continue outperforming the market in 2027.

MS expects "high-quality" growth underpinned by the wider themes of energy security, electrification and powering AI.
Its order of preference is National Grid, RWE, Engie, Iberdrola, E.ON and Enel.

Below: ETF European Utilities (red) versus Eurostoxx 50 (blue) year-to-date.

4. Citi and HSBC bet on India as oil slides and AI rotation fuels market revival.

Indian markets spent much of 2026 underperforming global peers as investors chased AI-linked investments and higher oil prices dented the outlook for Asia's third-largest economy. But a sharp drop in oil prices and a fall in AI stocks since the US mid-term elections have prompted a rethink.
"Decent earnings, lower oil prices and more measured AI spending are aligning to support India, with a potential rotation from crowded AI trades adding to foreign inflows," said Citi analysts, whose 28,000 Nifty target implies a roughly 12% upside from the index's last close.
"In an environment where investors are seeking to diversify away from concentrated AI exposure, India stands out for its market depth, domestic demand orientation and relatively resilient macro backdrop," HSBC analysts said.

Below: Rotation between India and the rest of EM.

5. A flight to safe havens is a clear sign of increased market angst.

US 10-year Treasury yields have fallen 50 bps from peaks above 5% hit last month on concerns about high debt, rising inflation and competition for capital as tech firms ramped up bond sales.

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