HSBC Raises Stock Outlook to Max Bullish — Here’s What the Bank Is Watching

TLDR

• HSBC’s positioning framework has hit its most bullish level for risk assets since Liberation Day
• The bank says “less bad” news is enough to keep markets rallying — a full resolution isn’t needed
• U.S. tax refunds are running 15–25% above 2025 levels, supporting consumer spending
• HSBC sees AI pessimism as having erased the U.S. tech valuation premium, creating a buy opportunity
• Treasury yields above 4.3% are flagged as the key risk threshold — the “Danger Zone”

HSBC is at its most bullish on stocks since Donald Trump’s “Liberation Day” tariff rollout, and the bank says investors are worrying too much about geopolitics.

In a note published Monday, analysts led by Max Kettner, HSBC’s chief multiasset strategist, said markets do not need a full resolution of the U.S.-Israel conflict with Iran to keep recovering. They just need things to get a little less bad.

The conflict between the U.S., Israel, and Iran has been running for about six weeks. Over the weekend, Washington and Tehran held 21 hours of talks but failed to reach an agreement. U.S. stocks were set to dip Monday after the breakdown, and oil crossed $100 a barrel after Trump ordered a Persian Gulf blockade.

Despite that, HSBC is not pulling back.

The bank’s positioning is maximum overweight equities. Its focus is on emerging market Asia, Japan, and Europe — with European banks getting a double mention. It also holds a double overweight on emerging market local rates and an overweight on high-yield credit.

Kettner’s team argues the rate of change matters more than the level when it comes to geopolitical risk. As credit spreads and stock prices near pre-escalation levels, the bank expects calls of investor complacency to grow. It is pushing back on that view.

What the Data Says

U.S. economic data is holding up. Tax refunds are running 15% to 25% above 2025 levels. Credit card spending is up. Same-store retail sales are picking up. HSBC says these numbers give it confidence heading into second-quarter earnings season.

The bank pointed to two quarters of AI pessimism as having nearly wiped out the valuation premium U.S. tech stocks once held. HSBC sees that as an opening. It expects a rotation back into U.S. and tech stocks as part of what it described as a likely V-shaped rebound across asset classes.

The Risk to Watch

HSBC did flag one key risk. If U.S. exceptionalism returns — meaning lower unemployment and stronger growth — Treasury yields could push back above 4.3% by the end of the second quarter or into summer.

The bank calls 4.3% on the 10-year Treasury the “Danger Zone” threshold. Above that level, pressure builds across nearly all asset classes.

As of Monday, oil is above $100 a barrel and U.S. stocks are heading for a lower open following the failed Iran talks over the weekend.

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