HSBC has raised its positioning framework to its most bullish level for risk assets since the "Liberation Day" tariff rollout, signaling strong confidence in equity markets despite ongoing geopolitical tensions. The bank's chief multiasset strategist, Max Kettner, argues that markets do not require a full resolution of the U.S.-Israel-Iran conflict to sustain their recovery, stating that "less bad news flow is good enough" to keep the rally going.
The conflict, now in its sixth week, saw a recent breakdown in talks between Washington and Tehran after 21 hours of negotiation, leading to a dip in U.S. stocks and oil prices crossing $100 a barrel following a reported blockade of the Strait of Hormuz ordered by President Trump. Despite this, HSBC maintains a maximum overweight position in equities, with a focus on emerging markets in Asia, Japan, and Europe—particularly highlighting European banks. The bank also holds a double overweight on emerging market local rates and an overweight on high-yield credit.
HSBC points to robust U.S. economic data as a key support, noting that tax refunds are running 15–25% above 2025 levels, alongside increases in credit card spending and same-store retail sales. The bank views the recent AI pessimism as having nearly erased the valuation premium for U.S. tech stocks, creating a buying opportunity and expecting a V-shaped rebound across asset classes, including a rotation back into U.S. and tech stocks.
However, HSBC flagged a critical risk: if U.S. exceptionalism returns with lower unemployment and stronger growth, Treasury yields could push back above 4.3% by the end of Q2 or into summer. The bank labels this level the "Danger Zone" threshold, above which pressure builds across nearly all asset classes.
Concurrently, the start of the Q2 2026 earnings season is under the shadow of geopolitical tensions, with investors questioning whether U.S. companies can maintain strong profits amid high energy costs. S&P 500 earnings for Q1 are estimated to rise about 14% year-over-year, potentially marking six straight quarters of double-digit profit growth—the longest run since 2011. Last week saw a risk-asset bounce, with the S&P 500 climbing over 3.5%, emerging-market stocks jumping 7.4%, and Bitcoin rising almost 10%, while oil prices dropped significantly.
Goldman Sachs kicked off earnings with strong Q1 results, beating expectations with earnings of $17.55 per share and revenue of $17.23 billion, driven by record equities trading revenue. The week ahead is packed with key earnings reports from major banks like JPMorgan and economic data releases, keeping traders focused on both corporate performance and geopolitical developments.
