Investors are not 'bullish enough' on the stock market rally, HSBC strategist says

HSBC's Chief Multi-Asset Strategist, Max Kettner, is maintaining a 'risk-on' stance on the current stock market rally, arguing that investors are underestimating potential upside despite widespread skepticism. Kettner believes softening Q2 EPS expectations create a low bar for companies to beat, potentially leading to positive surprises. He also asserts that the market has shown resilience to geopolitical escalations and potential tariff impacts, especially if the Federal Reserve cuts rates later in the year, and plans to scale up exposure to US risk assets.

Analysis

A chief multi-asset strategist at HSBC, Max Kettner, is articulating a strongly bullish, contrarian view on the U.S. equity market, specifically for the S&P 500 which has rallied to within 1% of its record high. This perspective pushes back against widespread investor skepticism fueled by geopolitical tensions and potential tariff impacts. Kettner's core argument is that the market's upside is being underestimated, to the point where he is concerned about not being "bullish enough." The rationale is threefold: first, lowered bottom-up Q2 EPS expectations have created a very low bar for companies to beat, potentially triggering positive stock reactions even with weaker year-over-year growth. Second, the market has demonstrated significant resilience to geopolitical events, such as the recent Iran-Israel conflict, suggesting such risks are largely priced in or overridden by other factors. Third, the potential economic fallout from tariffs is viewed as manageable, particularly if the Federal Reserve proceeds with anticipated interest rate cuts in the second half of the year. Consequently, the firm is maintaining a "risk-on" stance and is prepared to increase its exposure to U.S. risk assets.

Key Decisions for Investors

• Investors should note the contrarian 'risk-on' viewpoint, which suggests that prevailing bearish sentiment and low earnings expectations may present a tactical opportunity in U.S. equities.
• The upcoming Q2 earnings season becomes a critical catalyst; outperformance relative to the low consensus bar for S&P 500 EPS could validate this bullish thesis and fuel a further rally.
• Monitor Federal Reserve commentary closely, as the prospect of rate cuts in the latter half of the year is cited as a key mitigator for tariff-related risks and a support for risk asset valuations.