Barclays Favoring Growth Stocks Over Value in US Equity Market

Investing.com — Barclays (LON:BARC) strategists indicated on Wednesday that they continue to favor Growth stocks over Value in the US equity market, citing strong fundamentals and the dominance of big technology companies.

The investment bank emphasizes that Growth stocks still present an attractive valuation compared to the broader benchmark, while easing rates have negated the advantages for US Value, which has become the worst-performing factor in the US.

Barclays notes that the current economic landscape significantly differs from the post-election environment of 2016, with inflation and interest rates now higher. These elements, along with Treasury yield levels that could challenge equities, create a complex backdrop for Growth stocks.

Despite these challenges, Barclays believes that the earnings potential in technology could enhance Growth stocks, which remain “modestly cheap” by historical standards.

While a unified Republican control in the US has typically favored both Value and Growth sectors, changes in fiscal policy, tariffs, tax cuts, and deregulation may not substantially influence the relative performance of Value versus Growth stocks.

In contrast to its US outlook, Barclays holds an optimistic view on Value stocks in Europe, attributing this to their low valuation, cyclicality, and performance in reflationary macro conditions. The firm maintains a neutral stance on Growth stocks in the European market.

Furthermore, Barclays reiterated its neutrality on Momentum and Quality stocks within both US and European markets. “Trend-following performed well in both regions following the US Presidential election but has recently encountered a reversal. We downgraded Momentum to Neutral in both regions last month and continue to uphold that position,” stated strategists led by Venu Krishna.

They also expressed a preference for large-cap stocks in the US and small-cap stocks in Europe, while remaining neutral on high-volatility stocks in the US and adopting a negative view on defensive low-volatility stocks in Europe.