HSBC has expressed caution over the recent strength in equity markets, stating that the rebound in risk assets may lack underlying economic support. Despite a nine-day winning streak in the S&P 500—an occurrence seen only twice in the past 30 years—the bank maintains that the rally is primarily sentiment-led.
Market Optimism May Be Misplaced
In a recent note to clients, HSBC highlighted a 100 basis point tightening in U.S. high-yield credit spreads since early April, attributing this improvement largely to investor positioning rather than economic resilience.

“Sentiment and positioning is one thing,” analysts wrote, “but the fundamental backdrop remains pretty dire.”

While HSBC’s sentiment and positioning indicators continue to flash a buy signal, the firm noted that many indicators are approaching neutral territory. Systematic strategies such as volatility targeting and risk parity remain lightly positioned, which could lead to short-term gains if positive macro news emerges—particularly around trade policy.
Concerns Over Forward-Looking Data
HSBC cautioned that much of the strength in recent economic data could be attributed to frontloaded activity. The bank warned that more forward-looking indicators suggest that hard data could deteriorate in the coming months.
Additionally, analysts believe the Federal Reserve is unlikely to provide immediate support in its upcoming policy meeting, further limiting upside catalysts for the market.
Sector-Level Reality Check
For a data-driven view of whether recent equity gains are supported by earnings and macro trends, you can analyze performance across key industries using the Sector Historical API. This allows investors to track sector-specific fundamentals and evaluate which parts of the market are driving or lagging the broader rally.