It’s “all systems work” for global growth and rebound risk, says Barclays. Here’s how to play it.


US stocks appear poised for modest gains at Thursday’s open following Wednesday’s tech selloff on Wall Street.

Overnight, Chinese tech stocks took a hit when the US securities regulator said it has implemented a new law that could lead to a delisting from US markets.

Despite recent pressure on stocks, in our call of the day, Barclays said that “all systems work” with the risk rebound that will continue and global growth poised for its fastest pace in four decades.

The bank, in its latest global outlook, said fears of an overheating US economy would not derail the risk rally, urging investors to remain overweight equities.

“Yes, multiples of stocks have expanded over the past year, but much of the rally has been due to the absolutely staggering recovery in earnings,” said Macro Research Head Ajay Rajadhyaksha.

He noted that the S&P 500 SPX,
-0.55%
Earnings were not expected to reach 2019 levels until at least 2021, but earnings for the fourth quarter of 2020 outperformed the previous year. “A full V-shaped recovery in one year despite the backdrop of continued pandemic-related restrictions,” he added.

The earnings outlook, a consensus for growth of more than 21% between 2020 and 2021, was another reason to be optimistic, Rajadhyaksha said.

Stock market valuations may seem elevated relative to history, but the “scale of positive news expected in the coming quarters means stocks are not yet expensive to us,” Barclays added.

The bank maintained an end-2021 S&P 500 target of 4,000, and within US stocks it was overweight in industry and healthcare, as well as hardware and semiconductors. The strategists added that valuations looked more attractive in the UK and the euro zone, despite the latter’s slow launch of the COVID-19 vaccine.

In Europe, the bank is overweight value stocks, such as financial and commodity-linked stocks, but is more selective in cyclical sectors and underweight in defensive sectors.

Even the first quarter bond sell-off, which threatened to halt the rally, simply reflected a brighter growth outlook, but Barclays said it remained a risk.

“It is true that the fly in the ointment is the sell-off of bonds and the fear that inflation will force the Fed into a cycle of aggressive escalation that crushes the risk rebound. We believe these fears are exaggerated, ”the bank said.

“The bond market did everything it could to derail the risk rally in the first quarter. And it failed. “

The graphic

The Russell 2000 RUT,
-2.35%
It closed below its 50-day moving average (DMA) but more than 20% above its 200-day moving average on Tuesday, for the first time in the index’s 42-year history, Bespoke Investment Group noted. The index’s worst day in nearly a month ended its longest streak of closes above its 50-day moving average in 10 years.

Tailor-made investment group

Four of the five times the index has closed below its 50-DMA and more than 15% above its 200-DMA occurred “early in multi-year bull markets,” Bespoke added.

The markets

US Stock Futures ES00,
-0.37%

YM00,
-0.37%

NQ00,
-0.41%
Aimed slightly higher before the open, with Nasdaq futures rising 0.2% after the high-tech COMP index,
-2.01%
fell 2% on Wednesday. European stocks fell as concerns about a third wave of coronavirus on the continent remained in focus. Oil prices retreated early Thursday after skyrocketing higher on Wednesday amid the continued blockade of the Suez Canal.

The buzz

AstraZeneca AZN,
-0.08%
announced updated data from the phase 3 trial of its vaccine Wednesday night, saying it is 76% effective in preventing symptomatic COVID-19. The Swedish-British pharmaceutical company originally said on Monday that its vaccine had a 79% efficacy rate.

H&M HM.B,
-4.24%
and other clothing and footwear brands, including Nike NKE,
-2.89%
and Adidas ADS,
-5.20%,
They face backlash in China for raising concerns about forced labor in the Xinjiang region.

GameStop GME,
-33.79%
Shares suffered their worst day in seven weeks on Wednesday after fourth-quarter earnings and sales fell short of expectations. Wedbush analyst Michael Pachter also downgraded the video game retailer’s shares.

The Suez Canal, one of the most important trade routes in the world, remained blocked by a large cargo ship when efforts to free the ship entered on the third day.

The European Union put forward proposals for tighter controls on COVID-19 vaccine exports to the UK and other countries with better vaccination rates. The proposals will be discussed on Thursday, but tensions between the UK and the EU can be eased with an informed cooperation agreement.

Random readings

The new £ 50 UK note honoring mathematician Alan Turing will feature GCHQ’s “most difficult puzzle of all time”.

Good catch: a fisherman rescues a boy stranded on the ice.

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