HSBC strategists warn: investors should reduce their positions appropriately in US stocks before the midterm elections or after the financial reporting season ends

The Zhitong Finance App learned that Max Kettner, chief multi-asset strategist at HSBC Holdings, said that stock investors should consider reducing some positions appropriately after the end of this earnings season. He warned that overheated market sentiment, weakening fiscal stimulus effects, and uncertainty brought about by the US midterm elections could all trigger a correction in the stock market.

Kettner, who has maintained the “biggest overallocation” view of stocks since mid-March, said that current market positions and investor sentiment are close to the level of the 2021 economic restart period, while some US credit card consumption data already shows that consumer spending has begun to slow down.

He pointed out that the scale of fiscal stimulus brought about by the “Big Beautiful Bill (Big Beautiful Bill)” is comparable to the stimulus measures during the 2009 financial crisis, but the relevant stimulus effects are mainly concentrated in the first half of 2026, which means that additional financial support will be very limited in the future.

In an interview, Kettner said, “I think before the midterm elections, that is, after the end of the earnings season in about a month to a month and a half, it may be time to relax the throttle a little bit and reduce stock positions appropriately.”

Referring to the risks of the midterm elections, Kettner pointed out that the current polls show that the US Senate election situation is evenly matched (50 to 50), which makes the future of artificial intelligence (AI) and data center regulation policies more uncertain.

He said this may not only affect semiconductor or hyperscale cloud computing companies, but also put pressure on the entire technology sector. However, he believes that this adjustment will be an opportunity to buy on dips. He added, “This does not mean the beginning of a bear market, but is it enough to trigger a 5% to 10% correction before the midterm elections, that is, between September and October, when combined with seasonal factors and high market positions? I think it's possible. Then, after the midterm elections, it may be time to buy again.”

Furthermore, Kettner said that within the technology sector, he is still most optimistic about hyperscale cloud computing companies in the near future. He believes that the current market expectations for these companies are not high. Companies only need to avoid further increases in capital expenditure expectations or release a signal that future cash flow will not necessarily continue to be negative, which is enough to be a catalyst for rising stock prices.