Barclays Multi-Industry Stocks Outlook

Investing.com — Barclays expects multi-industry (MI) stocks to deliver an in-line performance next year and maintains a neutral sector view.

A strong fourth-quarter equity market rotation has propelled MI stocks to one of their best years in recent memory, outperforming the S&P 500.

This recent rally has been fueled by optimism regarding potential policy impacts of the Trump presidency, such as less regulation, increased domestic business investment, and lower corporate taxes—conditions that similarly benefited MI stocks during Trump’s first term in 2017, when the sector outperformed by 150 basis points.

Though Barclays (LON:BARC) analysts warn these anticipated gains may have already been "pulled forward" into the final months of 2024, leaving limited room for further outperformance.

Barclays highlighted Carrier for its very high HVAC exposure, some data center exposure, and low valuation. Additionally, Barclays upgraded Illinois Tool Works Inc (NYSE:ITW) and Rockwell Automation Inc (NYSE:ROK) from “under-weight” to “equal-weight” due to their revenue exposures. They also upgraded Gates Industrial Corporation plc (NYSE:GTES) to “overweight” from “equal-weight” because of its high supply-chain integration exposure and low valuation.

While MI stocks have benefitted from cyclical tailwinds and optimistic narratives in 2024, Barclays cautions that elevated valuations, slowing organic growth, and the risk of overextended gains could temper enthusiasm in the coming year.