Global markets keep shrugging off shocks. Here's what could break that streak, according to HSBC
Markets have shrugged off a barrage of shocks in recent years but that resilience may not last forever, according to HSBC.
TL;DR
- Global markets have shown remarkable resilience to recent shocks, including inflation, tariffs, and geopolitical conflicts.
- HSBC identifies higher corporate taxes, a rise in private-sector debt, and a shift in stock-bond correlations as potential risks.
- A withdrawal of perceived central bank support could test market resilience, especially in the U.S.
- Strong corporate earnings and economic growth, particularly in the U.S., have supported markets.
- The changing relationship between stocks and bonds, and a powerful wealth effect, have also contributed to market strength.
- Deutsche Bank warns that the current equilibrium is unsustainable, with risk assets complacent about stagflationary shocks.
- Lower energy intensity and relatively low private-sector leverage have helped markets absorb shocks.