TSX lower after index logs fresh record closing high
Investing.com - The outlook for global stocks appears to be "increasingly bifurcated" over the remainder of 2025, according to analysts at Barclays.
In a note to clients on Tuesday, the analysts said that while sectors like technology and financials have underperformed the wider S&P 500 so far this year, these segments are set to be bolstered by "idiosyncratic" trends like a boom in enthusiasm around artificial intelligence, possible mergers activity, and deregulation.
Meanwhile, most other sectors are expected to continue to "suffer" under the weight of "negative operating leverage and weak earnings per share revisions," the strategists argued.
They added that tech and financial firms, whose shares were somewhat subdued by uncertainty around President Donald Trump’s tariffs and signature fiscal package in the first half, could soon see a renewed period of strength.
"With trade war risks now fading, return dispersion should normalize, allowing true growth leaders to outperform," the Barclays analysts led by Stefano Pascale wrote. "Additionally, given the slowing macro backdrop, investors are likely to reward sectors that can still deliver earnings growth."
The bank credited mega-cap tech firms and financial companies for keeping the wider S&P 500 at above-trend growth, despite the recent second-quarter earnings season producing "overall great" reports.
Outside of the U.S., European health care and utilities stocks, which have benefited from some investor flight away from the U.S., may be "due for a reversal in fortunes." Health care names in Europe are viewed as "lagging, undervalued and underpositioned," while utilities may be vulnerable to "potentially higher rates and lower energy prices."
U.S. stock index futures inched higher on Tuesday. The main averages on Wall Street rose in the prior session, with the tech-heavy Nasdaq Composite in particular posting a fresh record high close. Underpinning sentiment were expectations that the Federal Reserve will soon cut interest rates in a bid to help support a potentially slowing U.S. labor market.