HSBC is calling for investors to keep an aggressive pro-risk stance across global markets, arguing that current macro and technical dynamics continue to support further appreciation in risk assets.
In a recent strategy note, the bank said it is "almost maximum OW in equities, and OW in HY credit, EMD and gold," while remaining underweight developed-market sovereigns, investment-grade credit and oil. HSBC framed the active positioning as driven less by geopolitical developments and more by the trajectory of U.S. rates, rates volatility and near-term growth expectations, noting that - in its view - geopolitics remains a secondary concern.
HSBC also singled out corporate profits and the outlook for equity earnings as a key factor. The bank argued that fourth-quarter S&P 500 earnings expectations are "still way too low," and on the eve of a pivotal earnings week recommends rotating "from the rates-sensitive high-beta sectors back to mega caps."
On interest-rate volatility, HSBC downplayed the immediate risk of a large upward repricing. The note said it does not expect the so-called "Danger Zone of higher U.S. rate expectations" to be triggered yet, and that U.S. labour market releases should remain "mixed enough," a state the bank believes will help to push volatility in FX and rates lower.
That environment underpins HSBC's overweight calls in high-yield credit and emerging-market debt, where the bank expresses a "preference for high-beta EM names." The strategy memo cited a broad set of technical indicators - sentiment, positioning, momentum and cyclical gauges - as collectively supportive of a continued risk-on and cyclical stance across asset classes.
Within equities, HSBC continues to favour the U.S., with a specific tilt toward mega-cap technology stocks, and it is also overweight Japan, eurozone banks and emerging markets. Separately, the bank upgraded U.K. gilts to overweight, arguing that near-term cyclical considerations should temporarily eclipse fiscal worries.
Implications for market participants
HSBC's stance implies a preference for cyclical exposure and credit risk where yields and spreads are perceived as attractive on a relative basis, while reducing exposure to safe-haven sovereign debt and higher-quality credit. Its guidance to shift from high-beta, rates-sensitive equity segments into mega-cap names reflects a view that earnings expectations for large U.S. corporates are underappreciated at present.
What HSBC highlights as drivers
- U.S. rates and rates volatility - cited as the primary market driver.
- Near-term growth expectations - viewed as central to positioning across assets.
- Technical indicators - sentiment, positioning, momentum and cyclical measures supporting risk-on positioning.
HSBC's recommendations are positioned around the bank's current reading of macro and market signals, and the note emphasizes a tactical rotation within risk assets ahead of key corporate earnings and macro releases.