By Neha Shaikh
Barclays has reaffirmed its preference for U.S. equities over international markets, citing an improving earnings environment, solid positioning across investor types, and valuations that, while elevated, still offer room for upside—especially in tech.
In a market commentary released Friday, analysts at Barclays said they remain tilted toward U.S. stocks relative to the rest of the world (RoW). The removal of previous overhangs and more upbeat economic surprises have helped reinforce their positive stance.
Tech Sector Still a Bright Spot
Barclays pointed to better-than-expected Q2 results from major U.S. tech names including Alphabet, Meta, and Microsoft, arguing that momentum in the sector remains strong. While valuations for Big Tech have climbed, they noted that the premium these stocks trade at compared to the broader S&P 500 is currently in the lower end of its historical range, suggesting more upside potential.
U.S. Valuations High—but Not Overstretched
Although U.S. equities are now priced at the higher end of their 10-year valuation range, Barclays doesn’t view this as a red flag. Large-cap American stocks are trading in the top 10% of historical observations, but similar trends are seen in European and Asia-Pacific markets, where valuations are also relatively rich.
Still, the firm acknowledged that compared to a month ago, valuation support for U.S. equities has slightly weakened. Even so, they see enough macro and earnings strength to justify staying overweight in U.S. markets.
Cautious on Asia-Pacific Despite Stronger Returns
Looking beyond U.S. borders, Barclays flagged recent equity strength in Asia-Pacific and emerging markets, but warned that underlying earnings trends aren’t as encouraging. Earnings-per-share (EPS) forecasts in APAC are beginning to trend lower, and profit margins are expected to decline year-over-year, which could act as a ceiling on gains.
Investor Positioning Still Leaves Room for Growth
Barclays also observed that investor exposure to U.S. stocks could continue to grow, particularly in sideways or rising markets. Strategies like Volatility Control and Risk Parity still have capacity to increase allocation, while both hedge funds and long-only managers have not yet reached full participation levels—leaving room for further inflows into U.S. equities.
In summary, while valuations in the U.S. are no longer cheap, strong earnings—especially in the tech sector—and positive economic signals are keeping the outlook attractive. Compared to global markets that are dealing with weaker earnings and shrinking margins, the U.S. continues to look like the more stable and promising bet for now.
