Growth stocks to remain supported by strong tech earnings: Barclays

Investing.com -- Barclays remains positive on Growth stocks, citing in a note on Tuesday, “Tech-led earnings strength and easing financial conditions,” while downgrading Value to negative amid “macro, market structure, and sector-specific headwinds.”

In its latest U.S. Equity Factor Insights report, Barclays analyst Venu Krishna told investors the bank has “turned negative on Value and stayed positive on Growth,” adding that it remains neutral on Large versus Small caps.

The bank also upgraded both Momentum and Quality to neutral, while keeping negative views on Yield and neutral on Volatility.

“Growth historically outperforms Value in periods of easing financial conditions,” Krishna wrote, noting that “Value tends to benefit from higher rates during economic expansion.”

The bank believes recent macro indicators point toward a “more supportive backdrop for Growth,” with manufacturing activity “mildly contractionary,” consumer sentiment weakening for a third straight month, and inflation and Treasury yields remaining “range-bound.”

Barclays’ rates strategists “caution against interpreting Chair Powell’s recent FOMC remarks as hawkish,” suggesting that “data points to further rate cuts,” which could boost Growth stocks.

Meanwhile, narrowing market breadth is weighing on Value performance. “Half of the S&P 500’s year-to-date gains are concentrated in just six stocks,” Barclays said. “Value typically benefits from broadening participation, so this persistent narrowness represents a headwind.”

Sector positioning also favors Growth, according to the note. “Value faces headwinds from negative revisions in Discretionary, Energy, and Staples, alongside upward revisions in Technology - where Growth has significant exposure.”

Barclays concluded that its “Growth over Value bias” is supported by “Tech-led earnings strength, potential easing monetary conditions, and degrading consumer sentiment.”

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