Equities: AI-led upside and income focus – HSBC

HSBC's Willem Sels points out that the convergence of rapidly expanding AI adoption, steady growth, and improving earnings is propelling global equities into the fourth quarter of 2026. The bank has recently augmented its exposure to global stocks, emphasizing the United States and Asia while preserving sector diversity. Attractive real yields in bonds, as well as Gold and alternative assets, are considered crucial portfolio stabilizers and income generators.

The investment team aims to provide four thematic investment strategies for the upcoming quarter to help investors navigate the rapidly evolving global landscape and make the most of emerging opportunities. However, a dichotomy persists: while AI remains a significant driver of market optimism, geopolitical uncertainties, inflation risks, and upcoming US mid-term elections continue to influence market dynamics.

Despite these challenges, Asia is anticipated to benefit from global chip demand and the expansion of data centers, playing a pivotal role in the global AI supply chain. AI adoption is also fostering productivity improvements worldwide, including in Europe. In addition to AI, defense spending and US re-industrialization are fostering growth opportunities in the Financials, Materials, and Energy sectors across regions.

Consequently, HSBC has recently increased its exposure to global equities, placing greater emphasis on the US and Asia while retaining a diversified sector allocation. The opportunity set also extends to bonds, where attractive real yields can provide both income and resilience against market volatility. Non-traditional assets, such as gold, infrastructure, and alternative assets, have proven effective in mitigating market uncertainty by offering counterbalancing stability during periods when equities and bonds face pressures.

Private assets, in particular, can open up a broader range of investment opportunities beyond the public market realm.