Stocks on Wall Street have run-up considerably within the last year as bulls ran wild when the March 2020 sell-off. whereas some believe this has created stocks too high-ticket, analysts at Barclays assume otherwise. However, the dimensions of positive news expected in coming back quarters imply that stocks still don’t look too high-ticket to the United States of America,” they said during a recent note. The international investment bank says it’s still overweight on equities, seeing positives ahead with higher earnings.
Earnings rise, according to Barclays analysts, has taken valuations to more comfortable levels. Although the S&P 500 has risen so much since then, “the solid realised and anticipated earnings growth means that valuation metrics are still less elevated now than in mid-2020,” according to the note. Furthermore, according to Barclays, the economic context is solid enough at this stage, with policy action likely to follow.
The stimulus and lockdowns in the United States have resulted in “forced savings,” which would likely help consumption in the post-pandemic world. According to Barclays, this would also support risk appetite in the future.
Earnings are expected to remain solid.
Earnings in the US financial markets are projected to stay high in 2021, allowing Barclay’s to keep its equities overweight, preferring them to fixed income. “We also prefer equities to fixed-income investments. Yes, equity multiples have risen in the last year, but most of the rally has been fueled by a stunning turnaround in earnings.”
Sectors to look at
Barclay’s area unit overweight sectors like hardware/semis (ex-FANMAG), industrials and health care. The investment bank is weedy on communications services (exFANMAG), utilities and assets, locution that the valuation premiums don’t seem to be even in these pockets.