Barclays sees global expansion intact, warns against market complacency

Investing.com -- Barclays has maintained a constructive stance on global equities heading into the third quarter but cautioned that markets have already priced in much of the good news, leaving investors with little room for error.

In a note by analyst Ajay Rajadhyaksha, Barclays said the U.S. profit cycle "remains the dominant force in global macro," with earnings broadening beyond mega-cap technology to support hiring, capital expenditure and consumption.

The bank forecast global economic growth of 3.1% in 2026, adding that "the global expansion should persist."

Despite the constructive backdrop, Barclays warned that "higher bond yields and richer valuations leave less room for error," and said bonds remain "the most challenged asset class" as fiscal and inflation profiles worsen globally. The bank reiterated its preference for equities over fixed income.

On artificial intelligence, Barclays noted that semiconductor order books remain "full well into 2027" and that vendor-financing concerns are exaggerated.

However, it acknowledged that an AI infrastructure overshoot relative to demand, comparable to the year 2000, remains a risk, though "that reckoning, even if it comes, is likely a 2028 problem, not a 2026 concern."

The bank expects the Federal Reserve to remain on hold for the rest of the year, while the European Central Bank and Bank of Japan will "likely tighten policy at the margin."

Barclays concluded: "Stay long the cycle. Stay short complacency."

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