HSBC Flags 3 Risks to Global Markets as U.S. Dominance Raises Fragility
Updated
Updated · CNBC · Sep 8
HSBC Flags 3 Risks to Global Markets as U.S. Dominance Raises Fragility
2 articles · Updated · CNBC · Sep 8
Summary
HSBC said global markets' long run of shrugging off shocks could break if corporate taxes rise, private-sector debt climbs again, or stocks and bonds revert to a more negative correlation.
U.S. markets sit at the center of that risk because equities, wealth effects and financial conditions are tightly linked, while any retreat in perceived central-bank backstops could further test resilience.
Near-term support still looks strong: HSBC cited repeatedly underestimated U.S. earnings, tax rates near multi-decade lows, high household cash holdings and lower energy intensity as buffers against bad news.
Bond markets no longer hedge equity risk as reliably as before, HSBC said, pushing investors toward equities and short-term hedges and helping sustain elevated valuations that could come under pressure if that relationship shifts.
Deutsche Bank struck a similar note Monday, warning risk assets look complacent as rates markets price a stagflationary shock that equities and credit have yet to fully reflect.