Stay positive on growth stocks and negative on value: Barclays

Barclays remains firm in its support for growth stocks over value, maintaining a positive outlook on growth across both the U.S. and Europe in a note Tuesday.

Despite recent weakness in U.S. tech stocks, the bank's analysts argue that strong fundamentals and attractive valuations continue to justify this stance.

"We maintain our Positive view on Growth, and Negative view on Value in both regions," they noted in their note, emphasizing that falling yields have removed a key tailwind for value stocks.

In the U.S., Barclays continues to favor large-cap stocks, citing better exposure to quality and growth metrics like sales and earnings per share (EPS).

Analysts believe the themes align with their positive view on the market.

"Large caps' better exposure to Quality and Sales/EPS growth (themes we are positive on) and much lower leverage/refinance risk" make them a more attractive choice than small caps, says Barclays.

In contrast, the bank prefers small caps in Europe, pointing to their "multi-decade low valuation" as a key reason for their optimism, despite lower yields not yet fully benefiting the style.

Momentum remains another focal point for Barclays, particularly in the U.S., where analysts remain positive on the factor, given its strong fundamentals.

"Momentum was the second best-performing factor in the US last month," they noted, reinforcing their position. "We maintain our Positive view on Momentum in the US given its strong fundamentals and attractive valuations."

However, analysts remain neutral on momentum in Europe, favoring growth stocks in the region instead.

Additionally, Barclays holds a negative outlook on high-volatility stocks in the U.S., arguing that these stocks have "mediocre Quality exposure" and are relatively expensive.

Conversely, analysts maintain a neutral stance on defensive low-volatility stocks in Europe, suggesting that macroeconomic conditions are not severe enough to warrant a shift to a more defensive position.

Source: Investing.com