Street Calls of the Week
Investing.com -- In a note to clients on Friday, HSBC analysts assessed three of the main debates related to their bullish global equity view.
These debates are focused on earnings strength, investor positioning, and the return on investment from artificial intelligence spending.
On earnings and the economy, HSBC noted that consensus forecasts for Q3 U.S. GDP sit at 1.7%, while Atlanta Fed GDPNow estimates are closer to 3.8%.
The bank pointed to real-time spending indicators showing consumer resilience and said, “We see upside for Q3 earnings. Consensus expects a slight 0.6% Q-o-q decline on a seasonally adjusted basis, which in our view is far too low.”
On positioning and the impact of monetary easing, HSBC highlighted that “U.S. household’s equity allocation stands at c50%, the highest on record,” while “roughly USD11trn now sits in money-market funds and time deposits.”
The analysts said Fed easing could encourage investors to rotate more of this cash into equities, adding that “positioning is not stretched.”
On artificial intelligence, HSBC stated that with the Magnificent 7 set to spend $350 billion in capex this year, investors are asking whether the payoff will justify the surge.
The bank remarked, “We don’t think we are in bubble territory yet,” citing that most of the spending “comes from deep-pocketed incumbents,” valuations “are less extreme,” and the “addressable market potential for generative AI at USD1.3trn by 2031 is enormous.”
HSBC remains overweight on Europe ex-U.K. and emerging markets, while underweight on Japan.