With the recent Wall Street market betting again on a shift in the Federal Reserve's monetary policy, analysts have signaled that a bull market is approaching.
Recently, HSBC Holdings strategists stated that if the Federal Reserve adjusts its monetary policy and avoids a recession, global stock markets are expected to achieve double-digit gains in 2024.
A soft landing of the US economy may drive global stock markets up
HSBC strategists expect the FTSE Global Index to close at 480 next year, up nearly 10% from Tuesday's closing level. Meanwhile, the US market and emerging markets remain their most promising regional markets, and they expect their profit expectations to be the most resilient.
The HSBC research team led by Alastair Pinder wrote in the report: "If the Federal Reserve can achieve a soft landing, it will mean there is clear upward space for the stock market
According to data compiled by HSBC, during the period from the Federal Reserve's first pause in rate hikes to six months after the Fed's first rate cut, if the Fed avoids a hard landing in the economy, the S&P 500 index can average up 22% in its previous historical performance; If the Federal Reserve fails to avoid an economic recession, the S&P 500 index will decline by an average of 14%.
The HSBC Pinder team stated that technology and non essential consumer goods are their most favored industries. At the same time, they also raised the ratings of consumer necessity and industrial stocks to overweight, and healthcare stocks to neutral. However, they also downgraded energy and financial stocks to neutral, while basic materials stocks were downgraded to underweight.
Is the recent rebound in US stocks not a flash in the pan?
HSBC's bullish signal comes as the S&P 500 index is currently rebounding.
In the past three years, US stocks have been fluctuating and falling due to concerns about the impact of higher long-term interest rates. And this month, the S&P 500 index has been up for 7 consecutive trading days, while the Nasdaq index has been up for 8 consecutive trading days, setting its longest consecutive rise since the "11 consecutive positive" period in November 2021.
Of course, not all Wall Street investment banks are optimistic about the sustainability of this rally. Michael Wilson, a strategist at Morgan Stanley, believes that this is just a bear market rebound, while Marko Kolanovic of JPMorgan Chase calls it a brief 'knee jerk reaction' in the market.
However, the HSBC team has a different view on this. HSBC strategist said, "After the recent stock market downturn, risk seems to have been better priced
The Pinder team believes that the main potential risks currently faced by US stocks include a sustained high interest rate environment, rising geopolitical uncertainty, and the US election.