HSBC HOLDINGS(US:HSBC)2025-10-19 15:58Summary of Key Points from the Conference Call Industry Overview - The report focuses on the multi-asset investment strategy as it heads into 2026, emphasizing the strength of the US economy despite recent tariff disputes and geopolitical tensions [2][18]. Core Insights and Arguments 1. Economic Fundamentals: High-frequency US data indicates a reacceleration compared to bearish consensus expectations, with a sequential earnings decline expected in Q3 for SPX ex tech [2][48]. 2. Impact of USD: A weaker USD is anticipated to benefit US equities in the upcoming quarters, contributing to positive wealth effects and potential AI capital expenditure from the 'One Big Beautiful Bill Act' [2][48]. 3. Market Sentiment: Current sentiment has shifted away from short-term sell signals, with machine learning indicators showing a risk-on stance. The overall positioning suggests potential upside for emerging market equities and local rates [3][70]. 4. Risks Ahead: The primary risk identified is the potential for higher long-end yields, which could arise if the market begins to price in an end to Federal Reserve rate cuts [4][50]. 5. Asset Allocation Strategy: The report advocates for a risk-on approach, favoring US and emerging market equities over risky fixed income, while remaining underweight in investment-grade credit [5][10]. 6. Earnings Expectations: Bottom-up data suggests that Q3 earnings expectations are low, which may be easier to beat, particularly with the supportive backdrop of a weaker USD [48][50]. 7. M&A Activity: There is an expectation of increased M&A and IPO volumes in the coming quarters, supported by a strong deal pipeline and upward revisions in company guidance [46][50]. Additional Important Insights - Geopolitical Concerns: Ongoing geopolitical tensions and trade policy uncertainties are acknowledged as headwinds, yet the global equity market remains at an all-time high [18]. - Consumer Spending: Positive wealth effects are expected to bolster consumer spending, particularly among high-income households in the US [41][50]. - Technical Indicators: The valuation-adjusted momentum framework continues to favor equities, particularly in emerging markets, while sentiment indicators suggest a cautious optimism among long-only investors [56][61]. - Japan Equities: A tactical overweight in Japan equities is recommended, particularly in the banking sector, which is expected to recover from recent underperformance [74][76]. This summary encapsulates the key points discussed in the conference call, highlighting the overall positive outlook for US equities and the strategic positioning of multi-asset investments as they approach 2026.