Key Takeaways:
Global equities sit less than 1% from their June record high despite Brent crude surging 40% year to date, South Korea's Kospi plunging 30% in July and the Philadelphia Semiconductor Index falling 16% over the past month.
"Nothing seems to shake this market," Max Kettner, head of multi-asset strategy at HSBC, wrote in a note this week. The strategist maintained his "maximum overweight" rating on global equities, arguing the market has already absorbed most negative shocks while positive catalysts remain ahead.
The call rests on five pillars. First, expectations for global economic growth have been marked down so sharply that positive surprises are now more likely than disappointments. Second, the current earnings season is delivering beats at a similar pace to the prior quarter, with corporate profit resilience continuing to exceed analyst forecasts. Third, US equity valuations — particularly for large-cap technology stocks — are lower today than they were when the US-Iran conflict first escalated, providing a wider safety margin for further gains.
Fourth, the sharp rise in US Treasury yields creates room for a pullback. The two-year note yields 4.316%, nearly a full percentage point above its level when Middle East tensions erupted. HSBC expects lower bond yields to support equities in coming months, though the bank maintains a tactical underweight on Treasuries for now. Fifth, the recent rotation out of memory-chip stocks and hyperscale cloud bonds has kept capital within equity markets rather than exiting entirely, a reallocation process HSBC expects to continue for several weeks.
Kettner has been one of Wall Street's most consistent bulls since 2023, when he maintained an overweight call on stocks even as most strategists turned cautious amid high inflation and aggressive rate hikes. The S&P 500 went on to rally 20% that year.
The maximum overweight stance implies HSBC's model portfolios hold the highest permissible allocation to equities. For investors, the call signals conviction that the current environment — resilient earnings, moderating rate fears and sector rotation — supports further upside. The next test for the thesis will come with the US consumer price index release on Oct. 10 and the start of third-quarter earnings season in mid-October.
This article is for informational purposes only and does not constitute investment advice.
