Are European value stocks the next leg of the rally?

Barclays Research sees European Value as the next potential leg of the rally, rating the factor Positive—the only factor with that designation—on the back of strong Q1 earnings delivery and improving earnings momentum. European Value averaged roughly 100 basis points of one-day price gains on earnings days in Q1 2026, while blended EPS growth in Europe rose about 7% (the strongest since Q1 2023). Barclays highlights Momentum crowding (80th two-year percentile) and a structurally negative correlation between Value and Momentum, suggesting Value could benefit if leadership broadens. Geopolitical and energy dynamics (Brent oil) and yields could further tilt outcomes, while U.S. Value has underperformed amid a Big Tech-led U.S. rally. Despite seasonal headwinds in May, Barclays retains a constructive stance—implying potential rotation flows into Europe 50 constituents, especially Financials and cyclicals, if earnings and de-risking progress persist.