HSBC stays bullish on equities, backs US, Asia and cyclicals

HSBC's ongoing preference for equities — especially its tilt toward the US, Japan and North Asia, as well as financials, industrials and commodity-linked shares — points to persistent institutional demand for cyclical and AI-related names rather than a defensive shift. The bank notes that US tech valuations have become less stretched relative to earnings growth, with the premium over UK and eurozone markets at its narrowest since 2020, which limits near-term valuation risk. Its more upbeat stance on Japan, driven by corporate governance improvements and steady monetary policy normalisation, suggests continued foreign buying of Japanese stocks. The bank's main concern — a prolonged or widening geopolitical conflict that triggers a sustained energy and inflation shock — remains the principal factor that could derail this outlook.

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That caveat deserves attention. The direction of the conflict is highly uncertain:

• Vance says Iran war will shift to new phase within month

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HSBC attributes the equity rally into Q4 to expanding earnings rather than overvalued multiples, according to its latest commentary.

Summary points:

• HSBC Private Bank's Q4 2026 investment outlook stays positive on global equities, citing sturdy economic growth and broader earnings momentum
• The bank favors the US, Japan and North Asia, plus financials, industrials, commodities and IT
• HSBC notes the US tech valuation premium over UK and eurozone stocks has dropped to its narrowest since 2020, attributing the US rally to earnings strength rather than multiple expansion
• Japan's appeal has risen for HSBC due to governance reforms, wage increases and gradual Bank of Japan policy normalization
• China offers selective opportunities in semiconductors, cloud computing and AI applications, HSBC says, while Europe is likely to keep underperforming due to weaker innovation and a smaller tech sector
• HSBC identifies a sustained or escalating geopolitical conflict that causes a prolonged energy and inflation shock as the primary risk to its positive outlook

HSBC Private Bank has kept a constructive stance on global stocks in its Q4 2026 outlook, highlighting resilient economic growth, broadening earnings momentum and rapid investment in artificial intelligence, infrastructure and re-industrialisation as key market supports.

Its preferences center on the United States and Asia, where earnings momentum and structural trends are strongest, as well as financials, industrials and commodity sectors on top of its existing tech overweight. HSBC contends that, despite macroeconomic and geopolitical headline risks, earnings growth should keep driving equities higher.

In the US, HSBC cites AI leadership, innovation and re-onshoring as supports for strong investment, along with firm demand for American energy exports. It says AI adoption benefits are spreading beyond the largest tech firms as computing capacity and productivity tools become more accessible, which helps explain the strong earnings beats in the second quarter. The bank also argues this earnings strength has kept valuations in check, with the price-to-earnings gap between the US and UK or eurozone now at its narrowest since 2020.

Asia still offers a range of opportunities, the bank says. South Korea continues to gain from the global memory and AI investment cycle, while China presents selective openings in domestic semiconductors, cloud computing and AI applications, which HSBC believes bolster its advanced manufacturing standing. The bank has also turned more favorable on Japan, pointing to broadening earnings strength, corporate governance reform, wage growth and gradual monetary policy normalisation as longer-term supports.

Europe has been more resilient than expected, HSBC notes, helped by higher defence spending and infrastructure investment, along with solid financial stock performance and the appeal of European dividends. Still, the bank expects the region to keep underperforming the US and Asia due to slower innovation and a smaller technology sector.

HSBC's key risk is geopolitical. A sustained or broader conflict that triggers a lasting energy and inflation shock, hurting growth, remains the main downside threat to its outlook. But absent a major deterioration in earnings, the bank says the fundamental backdrop for equities stays supportive, and global headline risks plus bond market volatility should not be enough to stop the market's upward trend.