The Middle East conflict is unlikely to shake the upward trend of the S&P 500, and Wall Street strongly recommends technology stocks as the new "safe haven."

According to the Zhitong Finance APP, at the beginning of this week, as tensions escalated in the Middle East, Wall Street strategists conveyed a message to U.S. stock investors: stay calm and buy on dips. This advice proved to be quite prescient when U.S. President Donald Trump announced a ceasefire agreement between Israel and Iran on Tuesday.

Paul Christopher from Wells Fargo Investment Institute and Sam Stovall from research firm CFRA both suggested that long-term investors increase their holdings in the information technology, communication services, and financial sectors. Dennis DeBusschere from 22V Research is more optimistic about growth stocks and momentum stocks.

These recommendations break the traditional logic during times of war and uncertainty—historically, markets tend to flock to defensive stocks. Strategists firmly believe that the Iran-Israel conflict will not have a lasting impact on the stock market, and technology companies (known for their rock-solid balance sheets and strong cash flows) are expected to serve as a safe haven as tensions rise.

Barclays strategist Venu Krishna stated in an interview on Monday, "Historical experience shows that geopolitical risks are always controllable, and the market has become accustomed to this. Therefore, we infer that this time will be no exception."

Traders seem to have noticed this trend. After a brief dip on Monday, the S&P 500 index closed up nearly 1%, led by technology stocks. The market viewed Iran's retaliatory strike against the U.S. military base in Qatar as a symbolic action. Since the outbreak of the latest round of Israel-Iran conflict in mid-June, the gains in the S&P 500 index have primarily been driven by technology stocks, while the defensive sector of healthcare has become the worst-performing sector.

Michael Kantrowitz, chief investment strategist at Piper Sandler & Co., pointed out, "Betting on defensive sectors is equivalent to betting on a market decline—but we believe this will not happen. As long as earnings expectations continue to rise, the 10-year U.S. Treasury yield remains below 4.5%, and oil prices stay below $85, we believe the market will continue to oscillate upward."

On Tuesday, the 10-year U.S. Treasury yield hovered below 4.4%, and WTI crude oil futures briefly fell to $64.4 per barrel.

Growth Expectations Remain Unchanged

Michael Wilson, a strategist at Morgan Stanley, also remains optimistic, stating that U.S. intervention over the weekend is unlikely to shake the institution's expectation that U.S. companies will achieve growth in the next 6 to 12 months. He noted that this outlook will remain unchanged unless oil prices surge significantly.

However, some investors are concerned that technology stock valuations (especially for leading companies) have begun to approach the highs seen earlier this year—specifically, the levels before the sell-off triggered by tariffs in March to early April. Since the overall market rebound, technology stocks have once again led the way.

Joe Gilbert, a portfolio manager at Integrity Asset Management, believes that the high price-to-earnings multiples of technology stocks pose a significant risk. He has shifted his focus to the industrial and financial sectors, which have relatively attractive valuations and still hold earnings growth expectations Currently, the forward price-to-earnings ratio of the S&P 500 Information Technology Index is 28 times, while the S&P 500 Industrial Index is 23 times, and the Financial Index is 17 times.

"I am generally concerned that tech stock trading has become too crowded," Gilbert said.

Nevertheless, some market observers believe that tech giants' stocks have the dual advantages of being safe havens and growth prospects. Michael O’Rourke, Chief Market Strategist at Jonestrading, stated, "For most of the past decade, the market has tended to view tech giants as defensive plays during periods of uncertainty. These companies have monopolistic-like businesses, strong cash flows, and generally low levels of debt. Investors see safety in size."