Barclays turns positive on U.S. Growth stocks, favored over Value

Investing.com -- Barclays upgraded its stance on U.S. Growth stocks in a note Tuesday, now favoring them over Value equities, as earnings momentum and macroeconomic conditions increasingly tilt in Growth’s favor.

In its June 2025 U.S. Equity Factor Insights report, the bank said it is “turning Positive on Growth” while downgrading Value and Yield to Negative.

“Equity rotation and earnings upside favor Growth over Value,” Barclays analysts wrote. “Softer macro data has eased inflation expectations, earnings revisions for broader SPX excluding Tech diverge from historical trends, and Big Tech is driving SPX returns again — all positive for Growth and negative for Value.”

Value’s defensive characteristics, which had helped during previous periods of market stress, are now seen as less appealing.

“Value’s lower beta is less appealing in a market beyond peak tariff uncertainty,” Barclays said. Additionally, the analysts noted that a weaker U.S. dollar should benefit Growth stocks, which tend to have greater international exposure.

The bank also downgraded Yield strategies, stating that although they offer downside protection, they are “poorly positioned for a broadening cycle” and lag in margin expansion potential.

While Momentum was upgraded to Neutral, Barclays highlighted caution due to “high correlations with Volatility” and a “slightly expensive” valuation. Meanwhile, its preference for Large over Small caps remains intact, citing better earnings growth and lower leverage risk.

“We still prefer Large over Small caps due to their better earnings growth, higher Quality, and much lower leverage/refinance risk,” the note said, adding that the Large cap factor is Barclays’ “best performing factor YTD (+15%).”

Despite stronger cyclical sentiment, the bank remains Neutral on Quality and Negative on high Volatility, pointing to valuation concerns and heightened reversal risks.

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