HSBC's Max Kettner advised equity investors to reduce positions after the current earnings season, warning that overheated market sentiment mirrors levels last seen during the 2021 economic restart. The strategist cited fading fiscal stimulus from the "Big Beautiful Bill" and uncertainty ahead of US midterm elections as key risks, noting that US credit card data already shows consumer spending slowing.
HSBC's Max Kettner advised investors to cut stock positions after earnings season, warning sentiment has reached levels last seen in 2021.
"Market positioning and investor sentiment are now close to the levels seen during the 2021 economic restart rally," Kettner, chief multi-asset strategist at HSBC Holdings, said in a note.
Kettner had maintained a "maximum overweight" stance on equities since mid-March. He pointed to fading fiscal support from the "Big Beautiful Bill," whose stimulus effect was concentrated in the first half of 2026, as a key reason for the shift. US credit card spending data already shows consumers pulling back, he said.
The warning comes as the US approaches midterm elections, adding political uncertainty to an already stretched market. The "Big Beautiful Bill" delivered fiscal stimulus comparable to the 2009 crisis-era measures, but with that support largely exhausted, the outlook for additional fiscal backing is limited, Kettner said.
Kettner's call marks a notable reversal from his previous bullish stance. Since mid-March, he had been one of the most vocal advocates for maximum equity exposure among major bank strategists, a position that paid off as the S&P 500 rallied through the first half of 2026.
The strategist's concerns extend beyond sentiment and fiscal policy. US consumer health, a critical pillar of the economic expansion, is showing early signs of strain. Credit card spending data cited by Kettner indicates that household budgets are tightening, a trend that could accelerate if labor market conditions soften.
The midterm elections add a layer of unpredictability. Policy outcomes ranging from tax changes to spending cuts could alter the economic trajectory, making it difficult for investors to position with conviction through the third quarter.
For investors who have ridden the rally since March, Kettner's warning signals that the risk-reward balance has shifted. The next catalyst to watch is the conclusion of earnings season, after which a wave of profit-taking could materialize as institutional investors rotate into defensive positions ahead of the midterms.
This article is for informational purposes only and does not constitute investment advice.
