Catenaa, Sunday, September 27, 2026- Stock markets are not far from their peak despite uncertainties around the US-Iran war due to broadening earnings, structural trends, and strategic investments.
HSBC said that the hawkish Fed tone made markets price in three further US rate hikes by June, which seems excessive.
“Therefore, USD should see less support, and we downgrade USD to neutral,” HSBC Private Bank said.
It added that the Fed meeting improved its inflation-fighting credentials and credibility, which may ease bond and stock volatility.
China’s growth outlook remains K-shaped, with strong exports and IT but sluggish consumption and investment.
HSBC said stock performance is therefore also K-shaped, and it has moved China’s stocks to neutral.
Moreover, it said US midterms often lead to mild volatility, but markets have proven resilient. “We maintain our risk-on stance and invest in structural trends like AI and energy independence, while keeping appropriate diversification,” it added.
HSBC Private Bank also said AI adoption is accelerating as models improve and applications proliferate, driving early-stage productivity gains and earnings growth, while infrastructure build-out continues at pace.
It noted that while recent news of market leaders slowing frontier AI model development could cause volatility in AI names, it should not affect investment flows and AI adoption.
Like with any new investment-intensive technology, HSBC said markets will probably keep challenging the AI narrative, fueling volatility and dispersion as competition and returns are reassessed.
“That shifts the opportunity from “AI excitement” to monetization—backing areas where profits are already visible and sustainable.”
“We take broad AI exposure, but make monetization the filter, tilt to cloud, semiconductors, and AI-enabled applications where profits are clearer and sustainable; stay selective in software and AI models where economics are less proven,” HSBC Private Bank said.
They have also broadened the expression beyond US IT into AI enablers, financials, materials, and energy, linked to funding, inputs, and power demand, and reflect the AI value chain in regional exposure: favor US, Japan, and North Asia equity markets (including Hong Kong and South Korea).
Finally, HSBC said that they use private markets to complement public AI exposure and access earlier-stage growth beyond listed megacaps
