(Bloomberg) -- A combination of mixed macroeconomic data and stretched investor sentiment suggests it’s time to sell risk assets, according to HSBC Holdings Plc (LON:HSBA).
“Fundamentally, the macro data does not justify the recent outperformance of risk assets,” wrote strategists including Max Kettner in a note to clients Monday. “We think risk assets are ripe for a pullback in the coming weeks.”
The HSBC team said they are “tactically” underweight global equities and high yield corporate debt and overweight government bonds in their allocation recommendations. They have a preference for Treasuries, non-core European sovereign debt and developed market stocks, and remain “particularly” underweight emerging market equities.
U.S. stock benchmarks climbed to all-time highs Monday, and Treasuries tumbled, as investors shrugged off weak factory orders data amid optimism on trade. The MSCI AC World Index has risen 9% since its mid-August low and is up 19% year-to-date.
Both the upside and downside for risk assets will be “constrained” over the next three to six months, with economic growth just “muddling through,” the strategists wrote. That implies neither a global recession nor a sustained rebound in growth, they added.
“However markets will likely price the extremes, becoming too pessimistic or too jubilant,” they said. “So this remains a ‘sell-the-rally, buy-the-dip’ environment.”
