HSBC: Now is a good time to increase holdings in risk assets

Stock markets (especially tech stocks) have been somewhat volatile recently, but HSBC's multi-asset strategists believe now is a buying opportunity. HSBC points out that although the S&P 500 is less than 5% away from its all-time high, market sentiment and positioning have clearly been dampened. Furthermore, high-yield bond spreads have only widened by less than 30 basis points since October, and emerging market bond spreads are narrowing, making the market appear quite peculiar over the past few weeks. They note that the VIX futures curve has shown a cash premium—which is uncommon—meaning traders perceive more uncertainty in the short term than in the long term. They largely attribute this to concerns about the most speculative part of the market, but even so, current bottom-up consensus forecasts indicate that S&P 500 net income excluding the tech sector will decline by 8% quarter-on-quarter. They stated, "Such low expectations actually set a lower threshold for the fourth-quarter earnings season in early 2026, and the Fed's December rate cut should help ease tensions and improve market sentiment." HSBC concluded, "This provides a favorable environment for increasing rather than reducing risk positions." (Jinshi)