SKN | HSBC Identifies the Structural Forces Behind Resilient Global Risk Assets

Key Takeaways:

• HSBC has identified several structural factors that have helped risk assets withstand repeated economic, financial and geopolitical shocks since 2022.
• The bank points to earnings and economic growth resilience as the most important foundations supporting markets.
• HSBC also highlights lower private-sector leverage, stronger credit quality, policy flexibility and changing energy intensity as sources of resilience.
• The bank’s framework also identifies vulnerabilities, particularly if U.S. economic conditions deteriorate or the relationship between equities and bonds changes materially.

HSBC has provided a detailed assessment of why global risk assets have remained remarkably resilient despite a succession of market shocks since 2022. In a strategy note, HSBC strategist Max Kettner examined the forces that have allowed markets to absorb higher inflation, elevated interest rates, banking-sector stress, tariffs, cryptocurrency losses and the unwinding of carry trades.

For HSBC, the resilience is not simply a function of investor confidence. The bank’s analysis points to a combination of corporate earnings, economic strength and structural improvements in financial markets that have helped absorb repeated disruptions.

HSBC Places Earnings Resilience at the Center of Its Market Framework

The strongest support identified by HSBC is the resilience of earnings and economic growth. Kettner noted that consensus expectations have repeatedly underestimated economic and corporate strength, including in areas outside technology and artificial intelligence.

This is significant because stronger earnings provide markets with a fundamental counterweight to higher interest rates. When companies continue generating profits, elevated discount rates do not necessarily translate into an immediate deterioration in equity fundamentals.

HSBC’s analysis therefore places greater emphasis on the underlying ability of companies and economies to absorb tighter financial conditions than on individual market shocks in isolation.

HSBC Highlights Structural Changes Supporting Risk Assets

The bank also identified several structural developments that have strengthened market resilience. HSBC pointed to lower leverage across non-government sectors and improvements in credit index quality, reducing some of the vulnerabilities associated with excessive private-sector borrowing.

The bank also highlighted the evolving relationship between equities and bonds. Although positive correlation can reduce the traditional diversification benefit of fixed income, HSBC sees the relationship as one factor that has helped sustain relatively high equity allocations.

Other supportive forces include the wealth effect, faster price discovery, passive-fund rebalancing and the greater range of policy tools available to central banks compared with the period before the global financial crisis.

HSBC also noted that developed economies are considerably less oil-intensive than they were during the 1970s and 1980s, potentially reducing the economic impact of energy-price shocks.

HSBC Defines the Conditions That Could Challenge Market Stability

Despite its assessment of resilience, HSBC is not dismissing downside risks. The bank considers the United States the most important vulnerability because of its substantial influence over global equity and credit markets.

Higher corporate taxation could create additional pressure on risk assets. HSBC also identified a potential return to a negative equity-bond correlation, particularly if inflation falls below target, as a factor that could change current portfolio dynamics.

A withdrawal of central-bank support during periods of market stress represents another potential risk, although Kettner considers that scenario difficult to envisage given the connections between equity markets, wealth effects and broader financial conditions.

What HSBC’s Framework Means for Global Wealth Management

HSBC’s analysis offers a measured message for global wealth holders: market resilience should not be confused with the absence of risk. The bank’s framework emphasizes understanding which structural forces are supporting valuations and which developments could weaken them.

For internationally diversified families and entrepreneurs, this reinforces the importance of portfolio resilience, liquidity management and genuine diversification across changing market regimes rather than relying solely on recent market behavior.

For a confidential discussion regarding cross-border wealth structures, portfolio resilience and strategic risk management, contact our senior advisory team.