Apr 17 2024: HSBC strategists have expressed optimism regarding the recent downturn in equity markets, viewing it as a temporary phase. Their bullish stance has led them to increase their exposure to stocks, particularly in the U.S., Japan, and Emerging Markets (EM).
The strategists have upgraded their position on high-yield (HY) credit to a “max bullish” approach and shifted EM hard currency debt to an overweight position. They are confident in their outlook, citing supportive fundamental and technical trends in equity markets.
Despite recent declines, the strategists note that current sentiment and market positioning do not raise major concerns. They highlight that real money investors are showing a more positive outlook on equities, signaling institutional confidence in the market’s potential.
HSBC’s team emphasizes that current valuations and momentum support a risk-on approach. They believe that any negative surprises in inflation or economic activity could prompt a reassessment of the Federal Reserve’s monetary policy, potentially leading to more accommodative measures that could boost investor confidence and drive a rebound in equity markets.
The strategists’ assessment is based on the expectation that a mild downside in economic indicators would prompt the Fed to consider more supportive measures, alleviating concerns about interest rate hikes.
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