Barclays Sees Equities Grinding Higher on Systematic Flows and Strong Fundamentals

Barclays maintains that the path of least resistance for equities remains upward, driven by muted re-risking, resilient corporate profits, and ample liquidity—despite cautious retail sentiment and stalled mutual-fund inflows.

Muted Retail Flows but Systematic Buying

• Retail and mutual funds saw only a modest pickup in equity allocations in May, leaving overall positioning high but sentiment cautious.

• Hedge funds and CTAs remain under-exposed, setting the stage for “systematic buying” as volatility stays contained.

These trend-following flows can prop up markets even when discretionary demand is tepid. To gauge valuation headroom across sectors, investors often reference the Sector P/E Ratio API, which shows that many key sectors still trade at attractive multiples relative to historical norms.

Resilient Earnings and Buybacks

• Earnings durability: Companies continue to beat consensus by a healthy margin, supporting equity valuations.

• Buyback resurgence: A pick-up in share-repurchase announcements adds incremental support to the market.

• Liquidity tailwinds: A steady rise in global M2 money supply underpins risk-asset demand.

For a deep dive into how past earnings surprises have influenced price moves, the Earnings Historical API offers session-level data on EPS beats, misses, and subsequent equity reactions.

Global Rotation and Dollar Dynamics

Barclays highlights a rotation from U.S. to Rest-of-World equities, synchronized with a weaker dollar:

• U.S. investors recently trimmed domestic holdings while buying into RoW markets.

• Domestic European demand remains steady, and EM equities benefit from currency tailwinds.

• Japan saw renewed inflows, even as bonds faced outflows on fiscal concerns.

This broadening participation suggests the rally may extend beyond U.S. mega-caps, offering diversified opportunities across global markets.