HSBC's strategy for U.S. stocks ahead of Q2 earnings: buy-the-dip
Any pullback in stocks going into the second quarter earnings season in July and August might offer investors a good opportunity to increase positions in U.S. equities, according to HSBC. Going into Thursday's trading, the S & P 500 was down about 25 points or a little more than 0.4% from Tuesday's close. Max Kettner, HSBC's chief multi-asset strategist, said in a note to clients published Wednesday that he's "mildly overweight" U.S. stocks, arguing it's unlikely that stocks face more downside risk after the whiplash investors saw following the unveiling of President Donald Trump's high tariff policy in April. The first half of 2025 "has been all about high levels of uncertainty, whether among companies, central banks or in politics," Kettner wrote to clients in a 36-page mid-year outlook. "But when looking at past spikes in economic policy uncertainty, we find that risk assets typically rebound rather than suffer further." Stocks initially plunged as Trump shared his plan for steep tariffs on U.S. imports, briefly sending the S & P 500 into a decline of more than 20% in early April versus the February all-time high. But Trump shortly after paused many of those duties until July, which has allowed the market to claw virtually all those losses. The S & P 500 is now up more than 3% on the year, through Wednesday. Market volatility, as measured by the VIX index traded on the Cboe, has also come down at a historically fast clip after spiking in the wake of Trump's announcement. .SPX YTD mountain S & P 500, year to date Kettner said it's "remarkable ... that despite the latest rally, our sentiment and positioning framework is still nowhere near sending a sell signal." Long-only investors cut back on equities in the first half, and quantitative investors have room to re-leverage, he said. Looking ahead, Kettner said any brief declines in stocks ahead of second-quarter earnings season can provide attractive entry points. In that event, the strategist recommends scaling "up exposure further, particularly in U.S. equities," saying HSBC is heading into the second half of the year with a "risk-on stance" toward financial assets.
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