MW Here are three big things the market is getting wrong about U.S. stocks, says this bank

By Steve Goldstein

HSBC says earnings expectations are too low heading into second-quarter earnings season

The moving target that is U.S. trade policy has been moving quite a bit this week, and the latest maneuvers from the leader of the free world has financial markets on the back foot this morning.

Not everyone is worried. "But to us and from a market perspective, the tariff debate has been thoroughly pushed to the background with the U.S.-China trade pause," say strategists at HSBC led by Max Kettner, chief multi-asset strategist at HSBC. "Similarly, recent price action is showing smaller sensitivity of risk assets to tariff headlines."

The U.S. economy, they point out, seems to be doing well - consumer spending in particular has rebounded - and consensus forecasts may be too pessimistic. "Such low forecasts of course lower the bar for positive surprises and in turn further positive revisions, which would then be another positive catalyst for risk assets," they say.

While inflation could be sparked from tariffs, so far it hasn't, and if anything prices seem to be cooling, they say. The other benefit from tariffs is that it keeps sentiment and positioning in line.

With corporate earnings season about to start in earnest next week, the strategists say the consensus for a quarter-on-quarter decline doesn't make sense. "Again, we disagree. Cuts to earnings estimates over the past few months have been the most significant in three years. Front-loading of activity should also mean at least a temporary bump in [earnings per share] in Q2, not a sequential decline," they say.

But surely, the market is expensive, right? Not really, they say - on an equal-weighted basis, the S&P 500 is trading only slightly above its long-term average.

HSBC strategists bring their views together by saying some of the biggest pain trades involve the U.S. "Whether it is the wide-spread idea of a significant slowdown of U.S. growth, a further weakening of the [U.S. dollar], or U.S. equities continuing to underperform in H2, all of these are quite widely held views," they say.

In their multi-asset portfolio recommendation, they boost their overweight on U.S. stocks by 4%, to 31% of a total portfolio. Equities overall are half their portfolio, with government bonds a quarter, corporate credit 10%, commodities 5% and cash 5%.

The markets

U.S. stock-market futures (ES00) (NQ00) were lower after the S&P 500 SPX finished Thursday at a record high. Bitcoin (BTCUSD) surged to a new record, and gold (GC00) rose as well.

   Key asset performance                                                Last       5d      1m      YTD     1y 
   S&P 500                                                              6280.46    0.02%   3.89%   6.78%   12.46% 
   Nasdaq Composite                                                     20,630.66  0.14%   4.92%   6.83%   12.84% 
   10-year Treasury                                                     4.392      4.10    -1.40   -18.40  20.50 
   Gold                                                                 3346       -0.01%  -3.09%  26.78%  38.49% 
   Oil                                                                  66.63      0.20%   -8.95%  -7.29%  -18.93% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

President Donald Trump threatened 35% tariffs on Canada, though the Wall Street Journal quoted a White House official as saying that number would only apply to goods not compliant with the U.S.-Mexico-Canada Agreement.

Trump separately told NBC News in an interview that countries that have not received a letter will be slapped with a tariff in the 15% to 20% range.

Levi Strauss $(LEVI)$ shares rose after the jeans maker lifted its sales forecast for the year.

BP $(BP)$, unlike rival Shell, said trading will help its results in the second quarter.

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The chart

Robin Brooks, senior fellow at the Brookings Institution, makes a similar point to HSBC as he points out the different reaction in the U.S. dollar now versus April to tariff developments. "Why is the dollar rising now, as the U.S. announces new tariffs on everyone? Difference is China, which is the only trade war that matters. That confrontation is on hold, so markets don't care," he said in a message on the X social-media platform.

Top tickers

Here are the most active stock-market tickers as of 6 a.m. Eastern.

   Ticker  Security name 
   TSLA    Tesla 
   NVDA    Nvidia 
   GME     GameStop 
   MSTR    MicroStrategy 
   AMD     Advanced Micro Devices 
   PLTR    Palantir Technologies 
   AAPL    Apple 
   NIO     Nio 
   COIN    Coinbase Global 
   AMZN    Amazon.com 

Random reads

Keeping up with the times - the Church of England explores gluten-free communion wafers, and alcohol-free communion wine.

A very alternative asset - a chunk of Mars is going to auction, and could fetch $4 million.

And the Mars meteorite is a bargain compared to what the first Birkin bag was auctioned for in Paris.

-Steve Goldstein

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July 11, 2025 06:25 ET (10:25 GMT)

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