Investing.com -- While market fundamentals remain robust, the recent post-election stock market rally may have accelerated too quickly, creating the potential for an abrupt reversal if volatility spikes, according to, Industrials, and small-cap stocks. Barclays describes this reaction as reflective of a “Trump playbook” in action, drawing on similar market behaviors observed in 2016.
Barclays strategists note that momentum stocks tend to hold up well in environments with yield curve inversions and when stock volatility remains mild. Still, after a notable rally since September, valuations have started to appear “a bit stretched relative to history.” Financials in particular capitalized on a rising rate environment historically, however, Barclays’s team stresses that this tailwind is now absent. Furthermore, the earnings growth outlook is “modestly weaker” today, and 10-year max valuations suggest that the upside is already priced in.