Investing.com — HSBC told clients in a note on Tuesday that the recent shakeout across risk assets has run its course, and a sell signal in its sentiment framework has now faded, keeping the bank firmly positioned for more gains.
The bank’s chief multi-asset strategist Max Kettner described a challenging two months in which oil rose $30 a barrel after the Middle East conflict flared, Asian memory names sold off 40%, momentum stocks fell sharply and SpaceX’s share price dropped 50% from its intraday high.
“And, yet, nothing has happened,” he wrote, noting global equities sit about 1% off their early-June record.
HSBC pointed to several reasons for the resilience. Growth expectations are much lower than earlier this year, and investors have again been too bearish on earnings, with S&P 500 12-month forward EPS upgraded another 5.5% over the past year and a broad-based second-quarter reporting season.
Valuations have also reset, with the forward price-to-earnings multiple now a full two turns below its 21.5 level at the start of the conflict.
The firm added that higher bond yields explain why equities have shrugged off oil, and said an unwind of “U.S. exceptionalism” could turn lower yields into a tailwind. HSBC also argued the hyperscaler debt selloff “masks lower issuance and strength elsewhere.”
With the bad news flow behind it, HSBC remains “max OW equities,” overweight high-yield and emerging-market credit, and underweight Treasuries, Japanese government bonds and oil. Crucially, it said, the sell signal in its sentiment and positioning framework “has now disappeared.”
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