Barclays analyst Venu Krishna warned in a note Wednesday that recent market rotation has exposed “fragility in the risk-on mood,” prompting changes to factor views across U.S. and European equities. In its latest Equity Factor Insights report, the bank said Value and Yield are leading the rotation while Momentum is fading and defensives are re-engaging in Europe.

In the United States, Barclays remains Positive on Growth, citing “still-solid fundamentals, rising earnings expectations in Big Tech, and durable AI-linked demand,” even as rotation has added volatility. The bank upgraded its U.S. Value view to Neutral from Negative, noting the factor “continues to benefit from recurring AI-related rotation episodes and a more supportive inflation backdrop,” though it added that much of the year-to-date performance reflects “multiple expansion rather than earnings.”

Barclays also turned more constructive on size dynamics, now holding a Positive view on large-over-small-cap pairs because “small-cap earnings expectations have deteriorated, valuations have re-rated, and Big Tech remains fundamentally stronger and more resilient.” The bank downgraded Momentum to Neutral, citing “stretched valuations, weak relative EPS momentum, rising dispersion, and fading AI-narrative support.” Barclays remains Negative on U.S. High-over-Low Volatility, citing “deteriorating fundamentals” and “rising sensitivity to sentiment shifts.”