Stocks can continue to rally as strong earnings recovery and still-low positioning levels offset concerns about rising bond yields, HSBC strategist Max Kettner said [1]. The S&P 500 Index has risen to record highs over the past six weeks despite higher oil prices from the Iran war and inflation-driven yield increases [1].
Max Kettner, chief multi-asset strategist at HSBC, described his stance on equities as "max bullish," emphasizing that momentum indicators are strongly positive and suggesting more upside potential for stocks [1, 2]. He told Bloomberg Television on May 13 that "all of our positioning stuff, both systematic and discretionary, is so far away from sending a sales signal," signaling strong investor confidence in equities despite some macro headwinds [2].
The S&P 500's recent surge has been driven by corporate earnings that continue to beat expectations. This growth in earnings appears to be the key factor allowing the stock market rally to sustain itself even as bond yields climb higher, often a headwind for equities [1]. Rising oil prices related to geopolitical tensions in Iran have also failed to derail investor appetite for stocks in the near term [1].
Kettner's bullish outlook stands in contrast with typical market concerns that rising yields would dampen equity gains by increasing borrowing costs and drawing investor interest away from stocks. Instead, he points to positioning metrics that indicate investors remain committed to equities. His comments underline the strong momentum behind the recent market rally and a prevailing belief that earnings growth will continue to support prices [1, 2].
Investors will watch upcoming earnings reports and economic data to see if the trend of strong earnings and controlled inflation continues. Market positioning and bond yield movements will also be key factors in gauging whether the stock rally remains intact.
The next key check-in will come with second-quarter earnings season in coming weeks, which will reveal if companies can maintain the earnings rebound supporting the bullish case for stocks.
