HSBC is holding to its most bullish positioning on risk assets since Liberation Day, arguing that markets can continue to recover without a complete settlement of tensions in the Middle East. The bank says an improvement at the margin - rather than an absolute resolution - is sufficient for investor confidence to rebuild.
Positioning and convictions
According to HSBC, its positioning framework is currently signaling the strongest buy recommendation for equities seen in months. The firm cautions against treating this as complacency, noting that credit spreads and equity valuations are approaching levels observed before the recent escalation in geopolitical risk.
"'Less bad' news flow is good enough, in our view," the bank wrote, underscoring that incremental positive developments should be adequate to sustain the market rebound.
HSBC's current allocations put it at a maximum overweight in equities, with specific emphasis on emerging market Asia, Japan and Europe - with European banks singled out for attention. In fixed income and credit, the bank favors a double overweight on emerging market local-currency rates and an overweight on high-yield credit.
Macro signals and consumer cushioning
The bank points to resilient high-frequency activity and a steady U.S. labor market as supportive fundamentals. HSBC also highlights that tax refunds are running at almost 15% above 2025 levels, which it interprets as additional support for consumer spending.
Earnings and market rotation
HSBC emphasizes that the global earnings outlook remains the more important market driver beyond geopolitics. The firm argues that recent pessimism toward artificial intelligence over the past two quarters has compressed the U.S. technology valuation premium, creating conditions for a rotation back into U.S. and technology shares. HSBC describes the broader market path as likely to feature a further V-shaped rebound across asset classes.
The bank also flags the risk of a renewed U.S. exceptionalism that could push Treasury yields back above 4.3 percent - a threshold it identifies as the upper boundary of a "Danger Zone" that could weigh on asset classes more broadly.
Ticker note
The bank discussed its positioning as the holding company HSBC (ticker HSBA) maintains its strategic stance across equities, credit and fixed income.
Analysts and investors should note that HSBC's guidance emphasizes margin-based improvement in geopolitical conditions, resilient U.S. activity metrics, and earnings dynamics as the primary forces shaping near-term market direction.