Despite the surge in COVID-19 cases, investors should look past near-term market volatility and buy U.S. stocks, BlackRock Investment Institute said, raising its recommendation to a buy-equivalent rating.

“We upgrade U.S. equities to overweight, expecting this market to benefit from both structural growth trends and a potential cyclical upswing during 2021,” said Mike Pyle, global chief investment strategist at BlackRock, in a report published Monday. “Positive vaccine news reinforces our outlook for an accelerated restart during 2021, reducing risks of permanent economic scarring.”

Large-cap companies riding structural growth trends and smaller companies geared to a potential cyclical upswing are preferred investment opportunities, Pyle said. He added that the U.S. stock market has a “higher share of quality companies” in sectors with longer-term growth trends, like technology and health care.

Investors have honed in on promising progress with COVID-19 vaccines, brushing past rising coronavirus infections across the world that have led to more lockdowns across North America and Europe. The S&P 500 Index is up about 10 per cent this year and is on pace for a 9 per cent gain this month alone.

Aside from the megacap tech stocks, there are also semiconductor and software companies that face few regulatory risks and have strong growth trends, BlackRock said. The financial sector has taken a hit in the low interest rate environment globally but only makes up a small weighting in the American market.

BlackRock had downgraded U.S. equities to neutral in June, after a stretch during which they outperformed, seeing risks of fading fiscal stimulus and election uncertainty. The S&P 500 has gained almost 20 per cent since then.