Barclays strategists say the S&P 500 index has underperformed most European and Asian stock markets since early 2025, a trend that could be ripe for a reversal. The U.S. large-cap index has returned 3% year-to-date as of April 22, while other markets have followed suit, continuing a trend that began in 2025. The year was marked by “sell America” trades as global investors reduced their exposure to U.S. assets. Top performers in 2026 include the UK’s FTSE 100, which returned 5.5%, while Japan’s Nikkei 225 and South Korea’s Kospi both hit record highs. The two Asian indexes have returned 15% and 49% year-to-date, respectively. Meanwhile, Latin American stocks continue to rise by double digits, thanks to the region’s great distance from the Middle East and limited direct trade ties, as well as the region’s commodity wealth. However, the rally on European stock exchanges lost some momentum, with Germany’s Dax down 1.4% in 2026 and France’s Cac40 almost flat. The pan-European Stoxx 600 index is up 3.3% since the beginning of the year. In any case, the S&P 500 index has yet to find its footing this year, despite hitting a record high of 7,143 on April 17th. “Domestically, health care and financials are weighing on performance, while energy, materials and industrials are benefiting from higher commodity prices and solid cyclical sentiment,” Barclays analysts said in a note published Wednesday. “Concentration in the S&P 500 continues to ease from its multi-decade peak, even as small-cap stocks outperform large-cap stocks and the top 10’s share of total earnings per share reaches new highs.” “Technology and financials largely explain the relative underperformance of the US compared to Europe and Asia-Pacific.”Despite the stagnant performance in some sectors, Barclays cited three reasons why US stocks could perform well in the coming months. Barclays says healthcare and financials have been one of the S%P500’s biggest critics this year, with revenues rising and valuations falling Firstly, analysts believe the US has a “stronger capacity” to absorb the energy shock from the Strait of Hormuz disruption, while Europe and Asia bear the brunt of rising oil prices. Barclays highlighted the largely resilient US consumers and strong inflows into US equity funds (more than $100 billion so far through 2026) as two examples of the market remaining solidly bullish despite the fallout from the ongoing Iran conflict. Next, analysts expect earnings momentum to favor the United States. “The Street continues to expect U.S. net margins to outperform global peers, with full-year margin estimates leading overall market capitalization,” they wrote. “Earnings revisions in Europe and Asia-Pacific have improved, but both are behind those in the US.” Barclays also sees US stocks as relatively cheaper. Analysts say valuations of U.S. stocks have fallen in recent months, “relieving some of the pressure” that had been building up. That’s not to say American companies are a bargain. Rather, a series of impressive earnings reports have driven its valuation sky-high over time. Barclays “looks much cheaper than the S&P when compared to the history of big tech companies,” he added, suggesting the entry point to the Magnificent Seven is more attractive than its year-to-date performance suggests.
