HSBC has revised its regional equity recommendations, moving to an overweight stance on U.S. equities from a prior neutral position. The change reflects what the bank describes as a reorientation of the market narrative toward corporate fundamentals, driven by earnings momentum and a reduction in geopolitical risk.
In its latest assessment, HSBC highlighted that nearly 30% of U.S. companies have reported first-quarter results to date, and that 84% of those reports have surpassed Wall Street expectations by an average of 12% - a pace the bank notes sits above the five-year average. HSBC also pointed to shareholder buybacks as a meaningful support for stock demand, noting announced S&P 500 buybacks total $430 billion year-to-date, an increase of 20% compared with the prior year. The bank added that seasonal patterns favor a typically strong second quarter.
HSBC did, however, take a more cautious view on Europe ex-UK, lowering its rating on that region to neutral. The bank's rationale centers on weaker activity in Europe and greater exposure to higher energy prices, which it sees as a downside risk for the region's economic momentum.
The bank reiterated sector preferences that favor areas with reduced exposure to commodity input costs. Banks, insurance and technology remain favored on that basis. At the sector level, HSBC upgraded global Basic Materials to overweight, attributing the move to robust earnings revisions and an expectation that commodities will be supported by a broader commodity "squeeze." Conversely, the bank downgraded global health care and industrials to neutral.
HSBC also flagged several watchpoints. First among them are oil and energy price trajectories. The bank warned of the potential for sector rotation if energy prices stay elevated for an extended period. It added that a durable ceasefire between the US and Iran would probably relieve pressure on energy prices, particularly if maritime traffic through the Strait of Hormuz returned to normal.
HSBC's repositioning is consistent with other recent moves among major brokerages that have favored U.S. stocks over global peers earlier in the month, reflecting similar conclusions about U.S. earnings strength and relative resilience.