Key Takeaways
- HSBC has adopted its most aggressive bullish stance on risk assets since the initial Liberation Day announcement
- According to the bank, markets only need marginal improvement in headlines — not complete resolution — to sustain gains
- Tax refund data shows distributions running 15–25% higher than 2025 figures, bolstering consumer activity
- The bank views recent AI skepticism as eliminating the tech valuation premium in the U.S., presenting a buying window
- 10-year Treasury yields breaking above 4.3% represent the critical risk level HSBC is monitoring closely
HSBC has reached its most optimistic position on equities since Donald Trump’s tariff announcement on “Liberation Day,” asserting that market participants are overestimating geopolitical risks.
In research released Monday, a team headed by Max Kettner, the bank’s chief multiasset strategist, indicated that a complete resolution of tensions involving the U.S., Israel, and Iran isn’t necessary for markets to continue their upward trajectory. Instead, even modest de-escalation could suffice.
“Less bad news flow is good enough, in our view,” the bank stated.
The standoff among the U.S., Israel, and Iran has persisted for approximately six weeks. During the weekend, Washington and Tehran engaged in 21 hours of negotiations without reaching consensus. Following the stalled discussions, U.S. equities were positioned for a decline on Monday, while oil crossed $100 per barrel following Trump’s announcement of a Persian Gulf blockade.
Nevertheless, HSBC maintains its aggressive stance.
The institution’s allocation framework shows maximum overweight positions in equities. Its preferred exposures include emerging market Asia, Japan, and Europe — with European financial institutions receiving particular emphasis. The bank also maintains a double overweight position in emerging market local rates alongside an overweight allocation to high-yield credit.
Kettner’s research group contends that the trajectory of geopolitical developments carries more weight than their absolute severity. With credit spreads and equity valuations approaching pre-conflict levels, the bank anticipates growing criticism about investor overconfidence. HSBC is rejecting that narrative.
Economic Indicators Paint a Positive Picture
U.S. economic metrics remain solid. Tax refund distributions are tracking 15% to 25% above 2025 benchmarks. Credit card transaction volumes show strength. Same-store retail performance is accelerating. HSBC indicates these figures provide assurance as second-quarter earnings season approaches.
“What matters more than geopolitics is what’s driving the global earnings outlook,” Kettner noted.
The firm highlighted how two consecutive quarters of artificial intelligence skepticism have essentially eliminated the valuation advantage previously enjoyed by U.S. technology companies. HSBC interprets this as a strategic entry point. The bank anticipates a shift back toward U.S. and technology equities as part of an anticipated V-shaped recovery spanning multiple asset categories.
The Critical Risk Factor
HSBC identified one primary concern. Should U.S. economic exceptionalism reassert itself — characterized by declining unemployment and accelerating growth — Treasury yields might climb back above 4.3% by late second quarter or during summer months.
The institution designates 4.3% on the 10-year Treasury as the “Danger Zone” benchmark. Breaching that threshold creates stress across virtually all asset categories.
As of Monday, crude oil trades above $100 per barrel while U.S. equities face a weaker opening following the unsuccessful Iran negotiations over the weekend.
