Barclays' Outlook on Global Equities Post U.S. Election

Investing.com reports that following the recent U.S. election, Barclays (LON:BARC) has a promising outlook for global equities, yet warns that European markets might underperform.

Expectations of a Trump Presidency

Barclays anticipates that a Trump presidency will eliminate the risk of prolonged election disputes and will introduce reflationary policies that bolster U.S. economic dominance. They believe that with supportive fundamentals, "the path of least resistance for global equities remains to the upside," although they caution that market reactions may be volatile in the near term.

Supporting Factors for Positive Equity Trend

Barclays outlines several factors that contribute to a positive global equity trend:
– The global economy is in decent shape, significantly bolstered by resilient U.S. growth and unexpected improvements in Europe and China.
– There is favorable year-end seasonality for stocks, driven by consumer resilience, rate cuts, and easing inflation.
– A stable labor market and revitalized manufacturing activity could further uplift global markets.

Fiscal Discipline and Earnings Reports

The bank stresses the importance of fiscal discipline in the U.S., particularly under a Republican-led government, as fiscal expansion might ignite inflation risks. Additionally, Barclays believes the earnings reports support the optimistic outlook, noting that despite mixed Q3 results, Europe saw positive EPS growth. They project mid-single-digit growth for 2025 if global GDP growth aligns with trend levels.

Risks and Valuations

Barclays acknowledges that there is a real risk of tariffs for Europe, with potential U.S. tariffs on European goods exacerbating pressure. However, they mention that valuations suggest a more cautious outlook, stating that after significant gains—especially in the U.S.—returns might be more modest going forward. Nevertheless, there are selective opportunities due to "valuation dispersion," especially among non-tech and emerging markets equities.

Conclusion

While rate cuts should ideally boost consumer spending and manufacturing, Barclays believes that Europe’s dependency on global conditions and tariff risks may lead it to lag behind the U.S. They conclude with a preference for U.S. consumer exposure and dollar-earning companies, expecting a continuation of U.S. hegemony, which reinforces Europe’s ongoing performance gap.