Barclays goes ‘overweight’ FTSE 100 amid global rout
Barclays strategists have upgraded their position on the FTSE 100 to ‘overweight’ in the face of the extreme rout of global stocks after Trump’s swingeing global tariffs.
Despite suffering its worst two-day trading period since the pandemic, London’s blue-chip index has outperformed its international peers in recent days, falling just under 10 per cent since Trump’s ‘Liberation Day’ speech. The S&P 500 fell by as much as 12 per cent since market open on Thursday, while the German Dax is down over 11 per cent.
Analysts at the London-listed lender cited the FTSE 100 firms’ tendency to be less exposed to macroeconomic trends, as well as its ability to hold up comparatively well in an era of stagflation, as driving their decision.
But they excluded the FTSE 250, London’s secondary index, from the upgrade due to its cyclical nature and domestic tilt.
“FTSE 100 is defensively-tilted, so can somewhat benefit from stagflation/ recession fear, and it is very cheap,” they wrote.
“We remain more cautious on the domestically-tilted [small- and mid-cap FTSE 250 as confidence in a domestic recovery has faltered, although bearishness is now quite high, UK is less exposed to tariffs and more [Bank of England] cuts and government re-focus on growth may help.”
UK-listed companies have been trading at historically low valuations relative to their peers in recent years.
The average price to earnings (PE) ratio on the FTSE 100 stands at 17.1x earnings, compared with a PE ratio of 21.3x on Germany’s Dax and 24.9x for the S&P 500.
The UK’s flagship index comprises proportionately more ‘defensive’ stocks like miners, energy companies, and supermarkets. Barclays expects these to help the FTSE 100 hold up better than indexes that boast more speculative and volatile stocks like the US’s tech-heavy Nasdaq.
Elsewhere in the note, the Barclays strategists said they now expected mild recessions in both the US and Europe but that Europe was slightly better position for the new trading order.
“The inflationary impact of of tariffs may keep the Fed on hold for now,” they wrote. “The EU economy is also expected to contract in 2025, but its growth-policy-trade-off is somewhat better, as the ECB has more room to cut and Germany fiscal stimulus should boost medium-term growth in the region.”