Citigroup Inc. strategists downgraded US stocks and the global tech sector, while upgrading European equities because of their lower exposure to AI turbulence.

The midterms outcome and the rout that followed have exposed the market’s vulnerability to stretched wagers on AI. Expectations of returns may now need a reset.

The dollar’s rebound is good news for shares in European exporters, just as companies enter the busiest stretch of the third-quarter reporting season.

Rising global bond yields are fueling skepticism about Europe’s equity rally, as investors worry that fiscal and inflation risks are causing cracks in what has so far been a resilient economy.

One of the key attractions of UK stocks is rapidly becoming less compelling.

European equities snapped a four-day losing streak, with energy shares leading gains in the index while the European Central Bank’s first interest-rate hike in three years lifted banks.

European equities could attract investors who are worried about the dominance of a handful of technology stocks, according to Sharon Bell, senior European equity strategist at Goldman Sachs Group Inc.

European stock markets could rise another 5% by the end of the year, driven by “an explosion of earnings,” said Beata Manthey, head of European equity strategy at Citigroup Global Markets Ltd.

The US consumer will slow down as real disposable income growth nears zero and fiscal support fades, threatening equity markets despite strong first-quarter earnings driven by artificial intelligence, according to Bhanu Baweja, chief strategist at UBS Group AG.

European stocks rose for a second day following a raft of positive earnings results, while investors monitored developments in negotiations between the US and Iran.

European stocks fell by the most since March as the latest rise in oil prices fanned inflation fears and worsened a global bond selloff.

Euro-zone stocks look attractive after the recent pullback, according to BlackRock Inc’s Thomas Becker, who argues that policymakers may use the current energy crisis to drive long-awaited fiscal investment.

Stocks can rally further as a powerful recovery in earnings and still-low positioning levels outweigh the threat from rising bond yields, according to Max Kettner, chief multi-asset strategist at HSBC Holdings Plc.

Strong corporate earnings are currently outweighing geopolitical concerns in financial markets despite tensions between the US and Iran, according to JPMorgan Chase & Co.’s Dubravko Lakos-Bujas.

Global fragmentation, artificial intelligence, and inflation are three defining forces shaping markets which have gained urgency due to recent events such as the war in the Middle East, according to JPMorgan Chase & Co.’s Grace Peters.

M&G Investment Management is taking profit in technology stocks that have seen rapid gains and is instead seeking undervalued companies with strong fundamentals given volatile markets, said executive Fabiana Fedeli.

UK shares erased most of their losses in thin holiday trading as oil declined amid hopes for a peace deal in the Iran war.

European stocks closed lower, as the prospect of a prolonged naval blockade of Iranian ports soured risk sentiment amid mixed earnings results.

Evelyn Chow’s space-focused stock fund is scouring Europe for bargains just as the looming debut of SpaceX supercharges valuations in the US.

European stocks fell as investors tracked developments around potential US-Iran peace talks amid a continued standoff in the Strait of Hormuz.