HSBC: Current Market Environment Suitable for Increasing Risk Assets

HSBC multi-asset strategists stated that although the S&P 500 Index is less than 5% away from its historical high and market sentiment and positioning have been significantly impacted, the current environment is suitable for increasing allocations to risk assets. Data shows that the high-yield bond spread has only widened by about 30 basis points since October, emerging market bond spreads continue to narrow, and the VIX futures curve spot premium indicates higher uncertainty among traders regarding the short-term market. HSBC pointed out that the net profit of the S&P 500 excluding the technology sector is expected to decline by 8% quarter-on-quarter, with low expectations setting a lower bar for the early 2026 earnings season. Meanwhile, the Federal Reserve's potential rate cut in December may ease market tensions and improve the investment environment.