Barclays has advised investors to reduce risk exposure in September, citing a confluence of seasonal weakness, decelerating U.S. economic momentum and fresh headwinds from monetary policy and energy markets. The call comes despite the bank maintaining a constructive medium-term outlook on equities, according to strategist Emmanuel Cau.
The recommendation follows Barclays’ expectation that the Federal Reserve will implement two additional rate hikes in 2026, alongside anticipated tightening by the European Central Bank and the Bank of Japan. These policy moves risk amplifying pressure on interest-rate-sensitive sectors, even as much of the tightening cycle is already reflected in asset prices, Cau noted.
September’s historically negative seasonality—particularly ahead of U.S. midterm elections—adds to the case for caution, the strategist said. Weakening U.S. activity data and a cooling post-second-quarter earnings momentum further underscore the need for defensive positioning, he added. Energy markets present another risk, with oil prices remaining elevated due to unresolved geopolitical tensions between the U.S. and Iran.
Cau also highlighted signs that the artificial intelligence investment theme is maturing, leading to increasing dispersion between winners and laggards across the equity market. In response, Barclays has adjusted portfolio positioning by downgrading building materials to market weight while upgrading insurance to the same level. The bank maintained a constructive stance on capital expenditure-linked themes in industrials, technology and mining.
Earnings growth remains a key pillar supporting the bullish case, with Barclays projecting earnings-per-share growth close to 20%. However, the strategist emphasized that tactical hedges and lower beta exposure are warranted given the near-term headwinds.
