HSBC CIO on Tariff Volatility Impacting Business Planning and Market Action

Market Volatility and Tariff Impact

• ⚠️ Tariff volatility and the "whipsawing of the markets" are dangerous and make it difficult to be constructive on US markets.
• 🎯 Businesses struggle to plan for the next three to five years due to an uncertain regulatory environment and unclear "rules of the road."
• 💡 While tariffs may be a tactical tool for better trade agreements, they risk harming the tech revolution and US reindustrialization, which require capital and stability.

Earnings and Macroeconomic Outlook

• 📉 Earnings estimates, particularly for the US, are expected to be revised downward from current projections.
• 📈 Despite potential earnings downgrades, the economy might stay afloat if corporate and household tax rates are lowered and deregulation occurs, especially with Federal Reserve intervention.
• 💰 The Federal Reserve is still expected to implement three rate cuts this year, though June might be a challenging month.

Tech Sector Performance and Portfolio Strategy

• 🎢 The tech sector's performance has been volatile, with mixed results for major companies like Apple, Nvidia, Amazon, and Microsoft.
• ⏳ A postponement of some tariffs is viewed positively, providing time to refine focus and avoid blanket implementations.
• 📈 Portfolio managers have been incrementally adding to equities during market downturns, adopting a long-term focus despite uncertainty about market bottoms.
• 🇺🇸 Days with significant market dips are seen as potential good entry points for long-term equity investors.