Investing.com -- Barclays strategists have upgraded their outlook on U.S. Value stocks, citing elevated oil prices, rising inflation expectations, and improving consumer sentiment as key drivers.

According to Barclays analyst Venu Krishna, the bank turned “Value positive, Growth neutral,” while downgrading Momentum to negative, reflecting heightened sensitivity to the recent oil price shock from the Iran conflict.

“Value continues to offer still attractive valuations relative to Growth even after recent months’ outperformance, and provides tactical protection in an increasingly inflationary and geopolitically uncertain environment,” Barclays said.

The note highlights that “elevated supply shock risks from the Iran conflict, recently improving consumer sentiment, firmer inflation expectations, and historical precedent from the Ukraine war episode tilt near-term risk-reward in Value’s favor, particularly via commodity-linked exposures.”

Growth equities, while structurally strong, are more exposed to rising inflation expectations due to their long-duration characteristics, Barclays noted.

Krishna wrote: “Growth faces a less supportive macro backdrop despite intact structural fundamentals. While AI-driven capex and tech-led earnings growth remain robust, Growth’s long-duration characteristics leave it more vulnerable to rising inflation expectations and a reassessment of Fed easing.”

Momentum was downgraded as Barclays noted “a sharp drawdown, rising volatility, and increased sensitivity to oil price shocks amid escalating geopolitical risk.”

Other factors largely remain unchanged, with large-cap stocks retaining their “superior earnings momentum, balance sheet strength, and exposure to secular AI growth themes,” while high-volatility and yield-oriented equities are expected to underperform in a supply shock-driven environment.