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While there might be an increase in the issuance of bonds in the near term, HSBC analysts do not anticipate this leading to widespread sell-offs similar to the ones experienced at the beginning of August.
Moreover, they believe that short-term sentiment and positioning are now neutral.
“We think this presents a pretty good tactical entry point into risk assets, above all into US equities,” they wrote in a client note.
HSBC analysts prefer U.S. over European equities as they argue that U.S. exceptionalism is increasingly making a comeback due to the following reasons.
1) “U.S. GDP growth expectations are continually being revised higher, Europe’s are not;
2) Leading indicators are pointing to a deeper contraction in Europe, whereas U.S. manufacturing might turn the corner soon; and
3) Eurozone headline inflation should drop to almost 2.5% in Q4, while in the U.S. our economists expect it to increase.”
