HSBC's Sell Signal Faded-Global Stocks Are Still Only 1% Below Record

Global equities absorbed the shock, and HSBC's sell signal faded

After two difficult months, global equities sit about 1% off their early-June record despite an oil spike and sharp tech selling. That resilience is the core read-through: the market took a hit, but it did not break. HSBC says the warning that once argued for less risk has now faded, as positioning improved and earnings estimates were lifted again.

What that resilience means

This does not prove the bull case is flawless. It does show that the easy sellers may have been worked out of the system. If bad headlines keep failing to produce a meaningful breakdown, that usually strengthens the case for further upside. The trade-off is that waiting for total certainty can mean paying a higher price later.

Why the S&P 500 still has room higher

The valuation reset changed the setup. Once the market became cheaper, the bull case no longer needed perfection; it needed only decent earnings execution.

The multiple reset lowered the hurdle rate

The S&P 500 is now around 19.5 on forward earnings, down from 21.5 at the start of the conflict. That matters because a lower multiple gives prices more room to rise even if earnings improve in a straightforward way rather than sparking a surge in investor enthusiasm.

That helps explain HSBC's 7,650 year-end 2026 target. The bank raised the target as it lifted 2026 S&P 500 earnings to about $325, implying roughly 20% growth. In this setup, investors do not need a dramatic sentiment reset to gain; they mostly need earnings to keep progressing.

Breadth could become a second engine

HSBC has also noted that many stocks still trade below their 52-week highs, which leaves room for a broader advance. A market led by a handful of giants can move sharply, but it often moves more steadily if participation widens.

That does not mean tech has to lose its leadership. HSBC still sees technology, chipmakers, and the Mag7 group as key drivers. The opportunity is that the rally does not have to depend on one narrow leadership group forever.

What could derail the rally

The bull case is not risk-free. The main failure points are AI earnings conversion, inflation pressure, and continued concentration in the same leaders.

AI spending still has to translate into profit

HSBC has warned about weaker tech earnings tied to heavy capital spending, and the broader market conversation is increasingly focused on overspending fears as the key AI market narrative. That is the real test: demand can stay strong, but if spending outpaces visible earnings power, leadership may stay narrow and the rally may become more fragile.

Oil and rates remain the macro tripwire

HSBC has also flagged higher oil prices and a more hawkish Federal Reserve if inflation proves stickier. That is the macro risk investors cannot ignore: if energy prices revive inflation fears, rates can rise again and press on equity valuations.

Selectivity matters in that backdrop. HSBC recently upgrades EU stocks while dropping its overweight call on EM equities on AI spending fears. That looks less like a blanket call on Europe and more like a relative preference for markets where the earnings payoff appears cleaner.

What to watch next

• Breadth: Confirmation is broader participation; risk is another narrow, tech-led move while most stocks stay weak.
• Lagging sectors: Confirmation is deferred groups starting to participate; risk is continued underperformance as the rally stretches.
• Credit: Confirmation is calmer credit conditions supporting lower-quality and rate-sensitive exposure; risk is stress rising alongside rates.
• Rates: Confirmation is orderly yields after the recent reset; risk is a sharper repricing that turns rates against equity valuations.
• Oil: Confirmation is stabilization after the shock; risk is another inflation scare driven by energy prices.