Hua Er Jie Jian Wen·2025-09-23 07:09Core Viewpoint - The report from HSBC indicates that the recent acceleration in U.S. economic data, combined with the Federal Reserve's inclination to lower interest rates, serves as a strong catalyst for the continued rise of risk assets [1][6]. Economic Recovery Signals - Macro data shows improvement in U.S. weekly retail sales and composite growth indicators since late June [3]. - Labor market indicators, such as private sector overtime hours, are beginning to exhibit early-cycle characteristics [3]. - Earnings expectations for major stock indices have been significantly revised upward in the past three months, a trend typically seen in the early stages of an economic cycle [3]. Capital Market Activity - There is a resurgence in capital market activities, with mergers and acquisitions (M&A) and initial public offerings (IPOs) showing signs of recovery [5]. Low-Income Household Pressures - Low-income households face multiple pressures, including higher inflation rates on essential goods, slower wage growth compared to high-income groups, and rising default rates on credit cards and auto loans [6][10]. - Despite these pressures, the overall level of credit defaults is not yet alarming [9]. High-Income Household Support - High-income households are currently in a strong financial position, contributing significantly to overall consumer demand [10]. - The top 10% of income earners account for approximately 50% of total consumption, which supports macroeconomic data despite the struggles of low-income households [11]. Investment Outlook - The current environment is favorable for increasing allocations to risk assets, particularly in cyclical sectors of the stock market [14]. - Emerging market equities and local currency bonds are rated for "overweight" due to limited potential for a rebound in the dollar [14]. - Conversely, U.S., U.K., and Japanese government bonds are rated for "underweight," as bond attractiveness remains weak compared to equities [14].