It’s time to start investing in US stocks and other high-risk assets, according to HSBC. Investors are heading into September after a weak month for equities. All three major averages will end their worst month of the year, with the S&P 500 and Nasdaq Composite on track to post five-month gains. Investors have cut their earnings after the extraordinary rally in tech stocks this year. Higher interest rates and weak global data weighed on equities. However, HSBC analyst Max Kettner said he doesn’t expect a “similar broad sell-off” in the future, even if interest rates remain high. He said a significant move to neutral in HSBC’s short-term sentiment indicator, and other bullish macro signals for the US, present opportunities ahead. .IXIC YTD mount Nasdaq Composite YTD “One key difference from a month ago is that our near-term sentiment and positioning index is now well out of contrarian sell territory and much more neutral,” Kettner said in a Tuesday note. “So we think this is a pretty good tactical entry point for risky assets, especially US equities.” In particular, the analyst pointed out that the US economy has largely gone from “strength to strength,” especially when compared to Europe and other parts of the world. While many economists are abandoning recession forecasts in the US, they still expect further weakness in Europe. “American exceptionalism is increasingly making a comeback: 1) US GDP growth expectations are constantly revised upwards, Europe’s are not; 2) Leading indicators point to a deeper contraction in Europe, while US manufacturing could soon be around the corner; and 3) Headline inflation in the Eurozone should fall to close to 2.5% in the fourth quarter, while in the US our economists expect it to rise,” Kettner wrote. “All this ensures that we continue to favor US equities over European equities in our tactical asset allocation, and European Duration over US Duration,” added Kettner. Other market participants agree that investors should keep an eye on Europe. They point to the troubled mortgage market, a more aggressive central bank and an economy weaker than the US. “We predict that Europe is heading for a fairly significant recession,” in the fourth or first quarter of next year. said Jay Hatfield, CEO of Infrastructure Capital Management.
