Barclays on Q4: ‘US Stocks to Outshine Europe’

Barclays Research expects U.S. equities to outperform their European counterparts in the fourth quarter, as the momentum from artificial intelligence investment and anticipated Federal Reserve rate cuts continues to buoy risk assets.

“The combination of anticipated Fed rate cuts and sustained AI momentum remains a powerful tailwind for risk assets,” Barclays said in its Q4 2025 Global Outlook report.

The bank added that it “continues to favour equities over fixed income for the coming quarter and expects U.S. stocks to outshine Europe.”

Despite slowing U.S. job growth and weakness in China’s exports and housing market, Barclays sees the “new economy,” powered by technology and digital innovation, helping sustain global growth.

The bank forecasts global GDP to rise 3.1% in 2025, slightly higher than its June projection, before easing next year.

While traditional industries have softened, Barclays said AI-driven productivity gains and a rebound in investor confidence are cushioning the global slowdown.

“Bond bulls interpret slowing growth as a prelude to rate cuts, while equity investors view those cuts as further support for AI-fuelled growth, brushing aside recession fears,” the note said.

Barclays described the current cycle as fundamentally different from the early-2000s dot-com boom, citing more disciplined capital expenditure, stronger balance sheets, and profitable growth among leading tech firms.

“Risk assets look set to close the year on a strong note,” Barclays concluded, with the U.S. positioned to lead global equity performance as investors brush aside recession fears and focus on the structural tailwinds from the AI revolution.