Investing.com -- In a note to clients on Tuesday, Barclays argued that U.S. equities remain attractive despite current valuation measures, saying the S&P 500’s current multiple “appears attractive relative to our 2026 growth outlook.”

Analyst Venu Krishna wrote that the index trading at “19x NTM EPS looks like an attractive entry point relative to our 15% 2026 EPS growth outlook,” supported by an improving macro backdrop, resilient earnings and a broad capex supercycle across hyperscalers, energy and defense.

Barclays acknowledged that recent readings of the Shiller CAPE ratio (at 38x) “bear uncomfortable resemblance” to levels seen in 1999 and 2021.

The bank noted that CAPE “famously exhibits a negative correlation with long-run equity returns,” and that today’s stock-level CAPE distribution could imply “elevated systemic risk across the large-cap U.S. equity universe.”

Still, the bank believes the broader context differs markedly from earlier peaks.

“Today’s environment features a relatively steadier Fed, improved financial conditions, and still-constructive earnings momentum and revisions,” Barclays wrote, contrasting it with periods when CAPE surged ahead of tightening policy and weakening earnings.

Krishna also warned that CAPE can “cast false warnings in fast-changing secular growth regimes,” highlighting the semiconductor sector as an example where a shorter “quasi-CAPE” has shown little predictive value due to rapid earnings expansion.

Barclays states that the risks, including private credit stresses and Middle East tensions, are unlikely to derail the growth cycle.

“The S&P 500 is trading at 19x NTM EPS for the first time in almost a year, which we view as an attractive entry point with respect to our forecast for 15% EPS growth in 2026. We see macro valuation support coming from 3 sides: growth, yields, and inflation,” Krishna concluded.