HSBC Strategist Identifies Factors Behind Resilience in Risk Assets
In a recent note, HSBC strategist Max Kettner outlined several factors that have contributed to the resilience of risk assets despite ongoing economic and geopolitical pressures since 2022. Despite challenges such as higher inflation, interest rates, regional banking issues, tariffs, cryptocurrency declines, and unwinding carry trades, equities continue performing strongly. Kettner highlighted earnings growth, underestimated economic resilience across sectors beyond tech, a positive equity-bond correlation, wealth effects, central bank policy tools, lower oil intensity in developed economies, reduced leverage outside government sectors, improved credit quality, faster price discovery, and passive fund rebalancing as key contributors to market stability. Kettner also identified potential risks that could disrupt the current environment. These include higher corporate taxes, a return of negative equity-bond correlation due to below-target inflation, or removal of central bank support during stress periods. However, he noted such scenarios are less likely given strong ties between equities and broader financial conditions.
Topics: central bank policy economic resilience equity valuations risk assets