Investing.com -- Barclays says investors should “fear the headlines, but trust the cycle,” arguing that an unusual mix of an energy shock and an AI-driven earnings boom supports staying overweight U.S. equities.

Analyst Ajay Rajadhyaksha told clients in a note that global markets have struggled this quarter as the U.S.–Iran conflict triggered a sharp rise in energy prices, hurting both stocks and bonds, but noted that “the worst-case scenarios will not materialize.”

Barclays highlighted that while the S&P 500 is down about 3% this year, the firm sees structural tailwinds from broadening AI adoption and a growing investment cycle across Western economies.

The bank expects U.S. corporate earnings to rise about 15% in 2026, calling the earnings backdrop the “key differentiator” versus Europe.

Barclays added that U.S. valuations have adjusted, pointing out that Big Tech forward multiples have fallen to their lowest levels since early 2025, even as earnings revisions have strengthened.

This “de-rating,” coupled with rising earnings, suggests performance “is not just a ‘Magnificent 7’ story.”

Monetary policy is another factor underpinning the call. Barclays said the Federal Reserve has more scope to look through energy-driven inflation than the European Central Bank, which markets still price for additional tightening.

That policy asymmetry, the bank argues, “reinforces the gap between U.S. and European equities.”

Barclays said the U.S. continues to offer the cleanest mix of solid earnings growth, AI-driven capital expenditure, margin support and policy flexibility. The firm concludes that investors should “lean into structural winners while hedging near-term macro and policy risks.”