HSBC is the latest banking giant to sour on the outlook for US stocks this year.
In a note to clients, strategists at HSBC Securities downgraded their rating of US stocks from “overweight” to “neutral.” It follows a similar move by Citi, which cut its rating of US stocks to “neutral” earlier this month.
“It is important to stress that we are not turning negative on US equities — but tactically, we see better opportunities elsewhere for now. Prevailing uncertainty around tariffs could see US equities remain challenged in the next few weeks, but we are hesitant to turn too cautious on the medium-term outlook,” HSBC said wrote.
Max Kettner, chief multi-asset strategist at the bank, told Bloomberg Television that he believes that the economy is going through a “confidence and a sentiment shock.”
Kettner pointed to the growing risk of a looming economic slowdown, given recent weakness in economic survey data.
For one, manufacturing looks to be on weak footing. Activity in the sector and expectations for future activity dropped for the second month in a row in March, while expectations for new orders and shipments also took a hit, according to the Philadelphia Fed’s latest Manufacturing Business Outlook Survey.
Federal Reserve Bank of Philadelphia/March 2025 Manufacturing Business Outlook Survey
Expectations for the job market are also falling. The Conference Board’s Present Situation Index, which measures how consumers feel about the outlook for their income, business activity, and the labor market, fell to a level of 65.2, the lowest in 12 years, the Conference Board said.
The Conference Board/NBER
Levels for the index are well below the key threshold of 80, which has typically been consistent with recessions.
“But I do fear that we’ve seen too much damage, and especially too much broad-based damage in the survey and the broad-based data in order to dismiss it as a one-off,” Kettner told Bloomberg on Wednesday.
“I don’t think this will take three, four, five months. I don’t think this is going to be a recession that is basically coming sometime in the second half. I do fear that we might get a pretty sharp slowdown in the data very early on, and very very soon,” he added.
In a note downgrading its outlook for US stocks earlier in March, Citi also cited growth concerns in their outlook for the market. Strategists, meanwhile, upgraded their rating on Chinese stocks from “neutral” to “overweight,” pointing to stronger growth expectations in the nation.
“In the big picture, US equity outperformance may well return when the AI narrative takes over again, but in the coming months, we expect US growth momentum to undershoot,” the bank wrote.
Meanwhile, Goldman Sachs, RBC, and Barclays have also trimmed their price targets for the S&P 500, reflecting more muted expectations for the US market after Wall Street entered 2025 on a wave of bullish sentiment boosted by Trump’s policies.