Wall Street is overreacting! HSBC: Continue to increase holdings of US stocks.
Unlike last year's stock market decline, the current economic growth in the United States is stronger.
September will be the worst-performing month for the S&P 500 index in 2023, with a decline of 5.1% (compared to a 5.8% decline in December 2022).
If the S&P 500 index can maintain its year-to-date return of 11%, it will be better than 2022, but perhaps not the rebound that many people hope for.
The increasing fear among investors may make the next three months challenging, especially in a situation where bad news is just bad news.
The situation is better this year than last year
Max Kettner, Chief Multi-Asset Strategist at HSBC, believes that the current situation is so bleak that the possibility of an unexpected rally should not be ruled out.
Although the catalyst for the recent pullback in US stocks is similar to the situation in 2022 - higher yields and a longer period of monetary policy tightening - they see a significant difference.
In a report to clients, HSBC strategists stated: "The key difference between this rate-driven sell-off and last year's is that this sell-off is not happening in the context of expected significant economic slowdown, but rather due to the fact that economic growth remains strong, especially in the United States."
"Therefore, credit spreads have remained much more stable compared to the stock market."
Should we continue to increase holdings in US stocks?
HSBC continues to increase holdings in US stocks, especially in energy stocks. As the fourth quarter approaches, in addition to confidence in US stocks, they generally favor US risk assets over European ones.
"The reason is simple: the recent general expectation for US economic growth remains low, similar to the past few quarters. Therefore, the threshold for surprises remains low."
For example, Kettner and Co. stated that it is really difficult to see any negative surprises in the next three to six months. Their own economists predict that the US economic growth rate in the fourth quarter and the first quarter will be higher.
The major changes in sentiment that have caused the decline in the S&P 500 index are US interest rate pricing, a rebound in the US dollar, and rising energy prices.
He refuted the following five concerns: 1) insufficient savings by US consumers; 2) rising consumer credit; 3) increasing credit card delinquency rates; 4) the suspension of student loan debt due dates; 5) an unstable job market.