HSBC's Max Kettner on Earnings, Market Enthusiasm, and Gold

Earnings as a Market Driver

• 💡 Earnings season is identified as the primary driver of current market enthusiasm, especially with fewer Fed-related data points.
• 🎯 Consensus expectations for Q3 earnings, excluding technology, have been significantly downgraded, setting a low bar for companies to exceed.
• 📈 This setup suggests a high probability of companies surpassing lowered expectations, leading to positive market reactions.

Performance of Non-Tech Stocks

• 📊 The performance of the "other 493" stocks (excluding major tech) is highlighted, showing they are not performing as poorly as might be assumed.
• ✅ In Q2, consensus earnings expectations for these stocks were around 2.5%, but realized earnings growth was approximately 8.5%, indicating substantial upside.
• ⚠️ A slight wobble last week was enough to trigger an outright buy signal, catching some investors off guard with the strength of the earnings season.

Sector Performance and Rotation

• 🏦 The performance of leaders like regional banks, homebuilders, and oil is questioned in a slowing economy context, with defenses like healthcare, utilities, and gold performing well.
• 💥 Idiosyncratic factors are seen as driving underperformance in sectors like oil and regional banks, rather than a broad economic slowdown.
• 📈 A preference is stated for large banks that were caught in the crossfire, viewing them as a safer bet than retail banks.
• 🔄 The market rotation is described not as a complete shift away from AI and tech, but rather a combination of buying dips in banks and rotating into manufacturing-sensitive industrials.

The Rise of Gold

• 🌟 The rise in gold prices, even with a strong stock market, is attributed to different drivers than equities.
• 🇨🇳 Key drivers for gold include China's stockpiling and continued central bank diversification.
• 🏦 The debasement trade narrative is questioned as the dollar has strengthened and yields have fallen.
• 📈 Gold is seen as a necessary nominal asset inflation hedge in an environment of widespread nominal asset price inflation.