Barclays flags frothy AI trade but says bull market has further to run

Barclays says the bull market still has room to run, but warns of froth concentrated in AI and semiconductor stocks and recommends hedging risks. The bank highlights stretched hedge fund and CTA positioning in momentum names, shrinking oil inventories, and yields nearing a “danger zone,” while also noting IPO supply and negative summer seasonality could prompt unwind in crowded trades. Barclays raised its European earnings growth forecast to 10% for 2026, set a STOXX 600 “peace target” of 670, and expects corporate buybacks to remain a tailwind (around two‑thirds of announced European repurchases still to be executed). While inflation resurgence increases the chance of further rate hikes, Barclays does not see a rapid Fed response. A potential U.S.-Iran peace deal could lower oil, spark a duration short squeeze and broaden the rally into rate‑sensitive sectors, Europe and consumer stocks.