HSBC's strategy report maintains a "risk appetite" stance: The U.S. economic recovery accelerates, prioritizing an overweight position in U.S. stocks and high-yield bonds

According to Zhitong Finance APP, HSBC recently released a multi-asset class strategy analysis report, focusing on market dynamics in August 2025. It clearly maintains a "risk appetite" stance for the last four months of 2025, recommending an overweight in high-yield bonds and stocks, with a particular preference for U.S. stocks. The core logic revolves around improvements in economic fundamentals, policy expectations, asset performance, and corporate earnings, along with specific allocation suggestions.

Acceleration of Recovery

From the perspective of economic fundamentals, clear signals indicate an acceleration in the recovery of the U.S. economy. In mid-August, the bank emphasized that the fundamental environment is improving: high-frequency macro data and micro data from companies continue to show positive trends. Currently, the bank still views tariff-related news as background noise in the market.

The continuous improvement in high-frequency macro and micro data in August contrasts with the market's subdued expectations, supporting the risk appetite stance as HSBC's GDP forecast diffusion index improves. The annualized quarter-on-quarter revision of U.S. Q2 GDP reached 3.3%, higher than the initial estimate of 3.0%, with consumption being the main support; the Atlanta Fed's real-time Q3 GDP forecast shows robust consumption, with goods consumption contributing to further increases in August.

However, inflationary pressures need to be monitored, as the core PCE inflation in July rose to 2.9% year-on-year, the highest since February, and super core inflation has accelerated over the past three months, with price pressures in July covering multiple sectors, and the impact of tariffs on goods inflation has also become evident.

Hawkish Risks

Although Federal Reserve Chairman Jerome Powell opened the possibility of a rate cut in September at the Jackson Hole meeting, the bank believes that market expectations for future policies remain overly dovish—current pricing indicates that the Fed may cut rates about 5.5 times by December 2026.

Even for the expectation of approximately 3.3 rate cuts before March 2026, considering that U.S. economic growth may be stronger than expected, inflationary pressures may further increase, and there is a downside risk to the unemployment rate (currently, few economists predict this scenario), the bank also finds this expectation overly aggressive, which may weaken the rationale for rate cuts.

If hawkish risks materialize, the bank believes this would not lead to a setback for risk assets: current interest rate expectations are far from entering the "danger zone." On the contrary, the initial strengthening of economic data may be interpreted by the market as a positive signal for risk assets. Additionally, former President Trump’s expectations for Fed rate cuts have previously led to a steepening of the U.S. Treasury yield curve, and HSBC remains cautious on the long end of U.S. Treasuries, maintaining an underweight position.

Maintaining a Positive Attitude Towards Risk Assets

The bank continues to overweight high-yield bonds and stocks, with a particular preference for U.S. stocks. The bank increasingly believes that the upward range of the S&P 500 index will further expand, for reasons including: (1) the continued widespread application of artificial intelligence (AI) across various industries; (2) signs of accelerated economic recovery may support certain lagging sectors sensitive to economic activity, such as durable goods and apparel, household and personal products, and transportation.

In terms of allocation suggestions, the bank recommends an overweight in stocks, prioritizing U.S. stocks, believing that this "broad-based rally" will benefit the equal-weighted S&P 500 index; however, the bank believes that the Russell 2000 index (small-cap index) currently lacks attractiveness.

Meanwhile, the bank recommends an overweight in U.S. dollar high-yield bonds and an underweight in U.S. Treasuries, as it continues to nearly maximally overweight U.S. dollar high-yield bonds—currently, the spread between BB-rated and B-rated bonds has fallen to a low level, but the spread for CCC-rated bonds remains about 65 basis points higher than the low in January In terms of foreign exchange, if the global economy and stock markets in developing markets remain strong, there may be room for improvement in emerging market currencies.

In asset performance, there is a clear differentiation among various asset classes in August 2025. Among commodities, gold rose due to expectations of interest rate cuts, while oil was boosted by geopolitical news; in the stock market, U.S. stocks hit record highs, Latin American stock markets rose over 6% in a month, and Japanese stocks performed well; in the fixed income sector, U.S. dollar high-yield bonds and 7-10 year U.S. Treasuries performed the best; in the foreign exchange market, G10 currencies showed differentiation, with most emerging market currencies depreciating against the U.S. dollar.

Corporate earnings and the impact of AI are important supports. The Q2 earnings reports in the U.S. were impressive, with 81% of S&P 500 companies exceeding EPS expectations and a year-on-year blended growth rate of 11.9%, achieving double-digit growth for three consecutive quarters, with strong performance in the financial and IT sectors, while the materials sector was weaker.

The impact of AI on companies is significant, with 44 S&P 500 sample companies achieving a 1.5% reduction in operating costs and an average efficiency improvement of 24% through AI; a 1% cost saving can partially offset tariff pressures, and HSBC recommends prioritizing companies with "real-world AI applications."

In terms of sentiment and fund positions, HSBC's comprehensive reverse sell signals indicate moderate selling, but the likelihood of a significant short-term correction is low, as the moderate sell signals correspond to limited correction amplitudes and lack fundamental triggering factors; actual fund investors are cautious about risk assets, with current slow recovery in fund inflows into risk assets, which will support risk assets