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Investing.com -- Barclays (LON:BARC) continues to favor U.S. Growth stocks while shifting its stance in Europe toward small caps, citing diverging regional fundamentals and positioning.
“In the U.S., we favor Growth (over Value) given Growth’s strong earnings momentum,” strategists led by Venu Krishna said.
They expect technology earnings per share (EPS) in the U.S. to grow 15% in the second quarter, compared to a 2% decline they project for the rest of the S&P 500.
Growth also outperformed Value by the widest margin in more than 25 years last quarter, strategists noted, buoyed by a weaker dollar and easing macro risks.
“Broadening remains a key risk,” they added.
At the same time, Barclays remains Neutral on both Growth and Value in Europe, saying short-term technical setups look stretched despite supportive fundamentals.
The bank also stays Neutral on Momentum across both regions, due to elevated dispersion and macro uncertainty in the U.S., and misalignment with macro data in Europe.
While Barclays continues to prefer Large Caps in the U.S. due to stronger quality exposure, better earnings trends, and lower leverage risk, it is more constructive on European Small Caps.
The bank describes them as offering a “cheap cyclical and domestic tilt,” benefiting from stronger earnings momentum and currency tailwinds.
“The euro remains a tailwind, with recent appreciation not yet fully reflected in EU small-cap valuations - providing a cushion should the currency soften. Also, earnings momentum has been strong, benefiting from stronger currency, so multiples remain appealing,” strategists said.
Positioning in the group remains balanced, with renewed inflows indicating growing interest without signs of being overstretched.
Meanwhile, the outlook on Quality remains mixed. Barclays is Neutral in the U.S., where high valuations and weakening balance sheets weigh on the factor.
In contrast, it holds a Positive view on Quality in Europe, where low crowding, cheap valuations, and an export-oriented profile are expected to support performance as tariff risks fade.
High Volatility stocks are still seen unfavorably in both regions. In the U.S., Barclays highlights “low quality and relative expensiveness,” while in Europe, Low Volatility is viewed as already pricing in a recession, limiting further upside.
The bank also reiterated a Negative stance on Yield stocks in both markets, citing overextension relative to macro signals and high crowding. In Europe, Barclays believes the factor’s recent rally on oil strength has run ahead of fundamentals.