Strategists at banking giant HSBC are "max bullish" on stocks even as the Iran war drags on, as attention turns to Big Tech earnings momentum. In a note to clients published on Tuesday, the lender's global multi-asset team — led by chief multi-asset strategist Max Kettner — said it was "still turbo bullish despite the Middle East conflict." Global stocks were volatile in the immediate aftermath of the U.S. and Israel's first strikes on Iran in late February, but have since shown resilience, with many major indexes recouping losses and now trading higher than before the war began. HSBC said it is "max bullish" on equities, arguing that the impact of the Middle East news flow on risk assets is asymmetric. "Temporary setbacks do little to equities, particularly in the US (and by extension the broader risk asset spectrum in credit, rates and FX too)," the bank's strategists wrote. "Any step closer to the Strait of Hormuz reopening would likely be taken as a significant positive, though." HSBC backs U.S. stocks The team has cut an overweight position in European equities, and extended an overweight to U.S. stocks ahead of earnings reports from Big Tech firms, including Microsoft , Amazon , Alphabet , Meta and Apple . "Fundamentally, things remain particularly strong in the U.S.," they said. "Tax refunds are now running even more ahead of 2025, which should help cushion the blow from higher energy prices." HSBC's team of strategists also highlighted a swathe of upgrades to earnings expectations for American companies, with tech firms accounting for more than half of those upward revisions. "This is what's much more important to our max bullish equity call right now: with AI and tech accounting for almost half of the market cap of the S & P 500 , this week's U.S. mega cap earnings hold much more significance than geopolitics," they said. .SPX YTD line S & P 500 However, Kettner's team stressed that their optimism around U.S. tech and AI is related to the immediate near term. "More medium term, note that we are still in this exceptional environment of pricing lower U.S. rates but accelerating earnings growth," they said. "Overall, we'd also note that the continued superior profitability outlook for the U.S. makes U.S. equities look relatively cheap." Optimism around American consumption should benefit companies beyond those in economically sensitive industries, they said, as well as "junk" parts of the U.S. equity market like non-profitable small caps. "So, we add to our overweight in US equities at the expense of European equities … the latest rounds of survey and hard activity data in the eurozone are showing early signs of demand destruction," they said. In a separate note on Tuesday, HSBC's head emerging markets and global equity strategist Alastair Pinder further explained the rationale behind upgrading the U.S. and downgrading Europe ex-U.K to a neutral allocation. "With U.S. activity and earnings momentum looking robust, we upgrade the market to overweight from neutral and fund this by downgrading Europe to neutral from overweight previously," he said. "European activity looks much weaker and is more at risk from higher energy prices." Pinder added that earnings momentum has turned decisively positive for U.S. stocks. With close to 30% of U.S. companies having reported, he said, "the early read is encouraging, with 84% beating expectations." "At the same time, valuations do not appear demanding," he added. Read more Citi backs European bank stocks after 'overblown' sell-off — here are its top three picks Sectors at risk Pinder cautioned that higher-for-longer energy prices would put pressure on U.S. consumption, adding that a sector rotation could take place as a result. "Our analysis shows airlines, air freight & logistics, utilities and household products are among the most sensitive sectors," he said, adding that a 10% price rise in oil, LNG, petrochemicals and fertilizers had the potential to reduce companies' EBITDA by up to 7%. "Some of this downside risk is already reflected in equity prices. Airlines, for instance, remain down 10% since 27 February," Pinder said. "However, other areas of the industrial complex such as construction & engineering and air freight & logistics may not yet fully reflect the pressure from higher input costs. We continue to prefer sectors with lower commodity input cost exposure — this includes banks, insurance and tech." He added that his team had also upgraded the basic materials sector to overweight.
