HSBC Holdings strategists have reduced their overweight position in US equities, reallocating funds to emerging markets and Europe. The shift reflects confidence in the strong economic momentum observed in these regions. According to the HSBC team led by Max Kettner, key cyclical indicators, including spending and manufacturing data, have shown significant improvement over the past two months, prompting a greater emphasis on markets outside the United States.
The strategists maintain a risk-on approach, encouraged by what they see as a positive outlook for technicals, market positioning, and overall sentiment. These factors, they believe, outweigh concerns related to geopolitical tensions, trade uncertainties, and anxieties surrounding artificial intelligence. Year-to-date, the S&P 500 index has risen 1.5 per cent, while the global equity index excluding US shares has surged by 11 per cent, and emerging markets have seen an even more substantial 15 per cent increase.
Within Europe, Kettner and his team are particularly favouring the industrials and financials sectors. They anticipate increased defence spending and robust demand for metals will benefit industrial companies, while banks are also expected to perform well. The MSCI Europe index is currently on track for its eighth consecutive month of gains, supported by limited exposure to technology stocks and increased government expenditure. Earnings reports for the region have also been positive, with MSCI Europe constituents reporting a 4.7 per cent rise in profits, surpassing the expected 1.3 per cent increase, according to Bloomberg Intelligence data.
