Global stocks remain cheaper and less crowded than U.S., stay long – Barclays

By Senad Karaahmetovic

Barclays equity strategists reaffirmed the Overweight rating on International equities as they still seem more attractive to U.S. stocks.

Europe, in particular, remains cheaper and less crowded than the U.S., they wrote in a client note. On the other hand, the analysts noted more crowded, valuation-richer U.S. equities, which are also likely to suffer as their multiyear earnings outperformance is starting to wane.

Europe has outperformed the U.S. by 450 basis points since Q3.

“The [Europe] region benefits more from positive China growth impulse, but also has higher exposure to the banking sector, which is a risk if confidence does not return.”

The strategists also reaffirmed Overweight ratings on U.K. equities, Emerging Markets and China, while Japan “faces growing policy uncertainty.”

As far as sectors are concerned, Barclays is Overweight Tech, Staples, and Energy, while Underweight Utilities, Industrials, and Real Estate.

“We think it is premature to think rates volatility is gone for good so a reasonably balanced Value/Growth stance is warranted in our view, given still-high valuation gap. This month we take the opportunity to reduce Autos (UW), having seen a strong run ytd. We move defensive Telco up to MW given ongoing consolidation noise in the sector,” they added.