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Investing.com -- Amid rising growth risks and heightened volatility due to new tariffs, Barclays (LON:BARC) analysts are shifting their focus toward defensive sectors.
Following President Trump’s announcement of reciprocal tariffs potentially exceeding 20%, markets have been left in shock.
As the tariffs are expected to dampen global economic growth, including in Europe, Barclays sees a rise in recession risks.
"Our economists believe that recession risks have risen, with policy support from governments and central banks crucial to gauge the extent of downside risks," said the bank in its latest report.
In this environment of heightened uncertainty, Barclays recommends focusing on sectors that are more insulated from the economic slowdown.
"We think defensive domestic exposure should continue to prevail, favouring Telcos and Real Estate (both OW) and Utilities (MW)," the analysts noted.
These sectors are typically more resilient during periods of economic stress, as they provide essential services that remain in demand even during downturns.
The impact of the tariffs is expected to be significant, especially for sectors heavily reliant on global trade.
Barclays highlights that industries such as Autos, Tech Hardware, Capital Goods, and Chemicals are most vulnerable to the tariff shock.
"At the sector level, our analysis shows Autos, Tech Hardware, Capital goods and Chemicals impacted the most among the merchandise goods export-oriented sectors," said Barclays.
While the EU equity market may face more downside in the near term, Barclays notes that it will not necessarily behave as a higher beta to US equities.