Is there an opportunity in the market crash? HSBC suggests that US stocks have already priced in a recession, making these three types of stocks "golden pits".

HSBC Global Research stated that despite the significant pullback in US equities recently due to recession fears, the bank believes the market has fully priced in the possibility of a mild recession and that there may be opportunities in the current volatility in the tech, financial and discretionary sectors. The bank noted in a report that the S&P 500 has fully retraced all of its gains since the US presidential election. The drivers include policy uncertainty from the flip-flopping tariff policy (already at historical highs), a sharp drop in consumer confidence, a weakening of optimism among small businesses, and a downward revision in the market's GDP growth expectations in 2025. This has led to a gradual increase in the discussion of a recession. However, HSBC still believes the US economy will remain resilient, albeit with growth slowing, and that current share prices have already factored in the possibility of a mild recession. During the recent market correction, the financial, tech and discretionary sectors have been hit the hardest. Concerns about a slowdown, a downward revision in interest rate expectations and a waning optimism about regulatory relief have weighed on financials; tech has been hit by both the DeepSeek and high valuations, especially in the hardware space. The consumer sector has been under pressure due to a drop in consumer confidence, a murky outlook for retailers and potential price hikes due to tariffs. But HSBC sees opportunities in the volatility. Historical data shows that the S&P 500 typically falls by 7-8% during a mild recession and often starts to rebound before the recession ends. The S&P 500 is down nearly 9% from its high, even considering all recession scenarios, which means the market may be close to the bottom. Against this backdrop, HSBC is bullish on the tech and financial sectors and selective on the discretionary sector. The bank noted that while tech stocks have pulled back significantly, current forward price-to-earnings ratios have returned to historical averages, the sector's earnings expectations are stable and its return on equity is high; financials are less affected by tariffs and trade threats and still expected to benefit from relaxed regulations and economic resilience; and in the discretionary sector, low-income consumers are under pressure but high-end consumers remain relatively resilient. Specifically, HSBC listed stocks with a buy rating from its equity analysts and a market capitalization of over $50bn, including Amazon (AMZN.US), Airbnb (ABNB.US), McDonald's (MCD.US) in the consumer space, and US Bancorp (BAC.US), Citigroup (C.US) in the financial sector, as well as Microsoft (MSFT.US), Nvidia (NVDA.US) in the tech space.