Gold prices edge higher on raised Fed rate cut hopes
Investing.com -- HSBC strategists led by Max Kettner upgraded their view for U.S. equities to Overweight from Neutral on Wednesday, citing renewed optimism around artificial intelligence and an expected boost from a weaker dollar.
The analysts also see support from subdued positioning and a potential pickup in business activity.
Despite high levels of uncertainty in the first half of the year, whether among companies, central banks, or in politics, HSBC remains optimistic.
When "looking at past spikes in economic policy uncertainty, we find that risk assets typically rebound rather than suffer further," said the bank.
One of the most frequent questions HSBC is receiving is about the next upside catalyst.
They believe that persistently "subdued sentiment and positioning" is one, alongside "potential positive activity surprises" and how "the weaker greenback could boost US earnings in Q2."
A potential deal on the U.S. tax cut agenda before summer "could be another near-term bullish catalyst for risk assets – assuming no immediate or disorderly long-end yield spike," wrote HSBC.
The bank is "mildly OW equities" overall and suggests that investors "use dips in the run-up to the upcoming Q2 reporting season to scale up exposure further," particularly in U.S. equities.
Within equities, they are Overweight EM, eurozone, and the U.S. Additionally, they remain Overweight EM debt and high-yield credit, while retaining gold as their "preferred portfolio hedge."
Conversely, HSBC is Underweight developed markets rates, especially U.S. Treasuries and Japanese Government Bonds.