Global stock performance is expected to diverge more sharply over the rest of 2025, according to Barclays analysts.
In a client note, the bank highlighted that while sectors such as technology and financials have lagged the broader S&P 500 this year, these areas may benefit from “idiosyncratic” tailwinds, including rising enthusiasm for artificial intelligence, potential merger activity, and deregulation.
Conversely, most other sectors are likely to continue facing pressure from “negative operating leverage and weak earnings per share revisions,” the strategists said.
Tech and financial stocks, which had been somewhat subdued amid uncertainty around President Donald Trump’s tariffs and fiscal policies earlier this year, may now experience renewed strength.
“With trade war risks now fading, return dispersion should normalize, allowing true growth leaders to outperform,” wrote Barclays analysts led by Stefano Pascale. “Additionally, given the slowing macro backdrop, investors are likely to reward sectors that can still deliver earnings growth.”
Barclays noted that mega-cap tech and financial firms have helped keep the S&P 500’s growth above trend, despite second-quarter earnings overall being “strong.”
Outside the U.S., European health care and utility stocks—which benefited from investor rotation away from the U.S.—may be “due for a reversal in fortunes.” European health care stocks are considered “lagging, undervalued, and underpositioned,” while utilities could face pressure from “potentially higher rates and lower energy prices.”
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