HSBC Downgrades U.S. Stocks, Upgrades Europe On Stimulus

HSBC has downgrades U.S. stocks to neutral and upgraded European stocks (excluding the UK) to overweight.

The bank sees signs of a mini earnings recession in early 2025, which it believes is already reflected in U.S. stock prices. This makes them less appealing for investors.

Meanwhile, European stocks are becoming more attractive due to game-changing fiscal stimulus, particularly in Germany, along with shifting global trade trends that favor the Eurozone.

The Trump administration’s major policy shifts, along with growing uncertainty in trade, have led investors to reconsider the U.S. market. At the same time, Europe’s plan for a $1.2 trillion fiscal boost and China’s rise as a leader in tech are shifting investor attention elsewhere.

The S&P 500 has dropped around 6.1% since hitting a record high on February 19, mainly due to concerns that the trade war could harm corporate profits and slow down growth.

That said, we’re not turning bearish on U.S. stocks, but for now, we see better investment opportunities in other regions,” explained HSBC’s Global Equity Strategist, Alastair Pinder.

Morgan Stanley’s Michael Wilson forecasts a further 5% dip in the S&P 500, bringing it to around 5,500 points by mid-year. However, he believes the market will recover, ending the year at roughly 6,500 points, a 12.7% gain from the last close.

“The market is likely to stay volatile as it deals with growth risks, which may worsen before they get better,” Wilson added in his recent analysis.

This is a developing story. Stay tuned for more updates.