Analysts at Barclays argue that a renewed focus on “fundamentals” is crucial for navigating today’s U.S. equity markets, which face broader economic headwinds and elevated geopolitical risks.
In a note, the bank suggested it “may be time” for investors to “get back to the basics,” concentrating on corporate financial statements and identifying companies well-positioned to succeed under current market conditions.
The second-quarter earnings season delivered “strong” results, with earnings per share (EPS) growth of 10.6% and sales growth of 6.1%, according to analysts including Andrew Ferremi. They also noted that Barclays strategists recently increased their 2025 S&P 500 price target to 6,450 from 6,050, alongside upward revisions to EPS forecasts, following a fiscal first half that proved “stronger than expected.”
While “fundamentals appear to be largely intact,” the analysts observed that excitement surrounding artificial intelligence has “shown no signs of losing steam” in the wake of the latest quarterly results.
The AI-driven rally has acted as a key engine for the broader U.S. stock market, helping equities recover after an early April slump triggered by President Donald Trump’s tariff announcements. The S&P 500 has climbed more than 13% year-to-date, though it slipped slightly on Tuesday, ending a brief streak of fresh all-time highs.
“[S]tructural shifts – most notably the rapid development of AI – are beginning to reshape industries and investment narratives. While AI has driven significant gains in select areas of the market, the broader implications of this technology are likely only beginning to unfold,” the analysts wrote.
Barclays stressed the importance of identifying firms with “operational strength and strategic positioning to not only adapt, but continue to thrive as this secular trend accelerates,” alongside names considered attractively valued by sector analysts.
Among the “overweight”-rated stocks highlighted for their “best fundamental stories” and reasonable valuations — with an average market cap of around $30 billion — were Deckers Outdoor, Lennox International, and Thermo Fisher. Autodesk, CVS Health, and Newell Brands were also singled out as “idiosyncratic drivers to the upside,” averaging a market cap of roughly $29 billion.
The analysts also flagged “contrarian ideas” regardless of rating, including Carrier Global, Penn Entertainment, and Texas Instruments.
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