HSBC Strategists Predict 10% Rally in Global Stocks on Soft Landing
According to HSBC Holdings Plc strategists, global equities have the potential for a double-digit rally in 2024 if the Federal Reserve adjusts its monetary policy to achieve a soft landing for the economy and avoid a recession. The strategists believe that if the Fed can successfully engineer a soft landing, it would result in notable upside for equities. Historical data shows that in previous instances where the Fed avoided a hard landing, the S&P 500 experienced an average rally of 22% between the pause in rate hikes and six months after the Fed began cutting rates.
The HSBC strategists expect the FTSE All-World Index to reach 480 by the end of next year, indicating a potential upside of nearly 10% from its current level. They maintain an overweight stance on the US and emerging markets, as these regions are expected to provide resilient earnings estimates.
While the S&P 500 has experienced recent volatility due to concerns about the impact of higher interest rates, the HSBC strategists believe that risks are now better priced after the recent pullback in equity markets. They have identified technology and consumer discretionary sectors as their preferred sectors, and have raised consumer staples and industrials to overweight while downgrading energy and financials to neutral, and basic materials to underweight.
Key risks to the HSBC strategists' view include a prolonged period of higher interest rates, geopolitical uncertainty surrounding the US elections, and a potential sharper-than-expected slowdown in the Chinese economy.
Implications for New Businesses in the Stock Market
HSBC Holdings Plc strategists' prediction of a 10% rally in global stocks following a soft landing in 2024 could have significant implications for new businesses. This potential rally, driven by the Federal Reserve's adjustment of its monetary policy to avoid a recession, could provide a significant boost for businesses, especially those in the early stages of their growth trajectory.
Opportunities and Risks
The expected rise in the FTSE All-World Index and the positive outlook on the US and emerging markets could present new businesses with opportunities for investment and expansion. However, these opportunities come with risks. The recent volatility in the S&P 500 and the potential for a prolonged period of higher interest rates highlight the need for careful financial management and strategic planning.
Strategic Sectors for Investment
HSBC strategists' preference for technology and consumer discretionary sectors, along with their upgrade of consumer staples and industrials to overweight, suggest these sectors could offer promising prospects for new businesses. However, the downgrade of energy, financials, and basic materials to neutral or underweight signals potential challenges in these sectors. New businesses must therefore carefully consider their investment strategies in light of these predictions.