Now that the worst fears over rising Iranian oil prices are behind us, it’s time for investors to maximize their equity exposure, HSBC said. “Yesterday’s price action represented a ‘peak of fear’ for us, with some positioning indicators showing pandemic-type signs,” Max Kettner, chief multi-asset strategist at HSBC, said in an upgrade on the stock. “Stocks are currently at max (overweight), and the movement of the past few days has faded.”Stock prices rose on Tuesday, following a major reversal in major averages in the previous session following President Donald Trump’s remarks that “the war is almost completely over.” A 14% drop in US crude oil prices to $80 per barrel also boosted stock prices. It rose to nearly $120 earlier this week. Of course, investors remain skeptical that the sell-off is over. The S&P 500 index is only 2.5% off its all-time high, and volatility remains high. The CBOE Volatility Index (VIX), also known as Wall Street’s fear index, was last above 20 after going above 30 on Monday. .SPX 5D Mountain SPX 5-Day Chart But HSBC’s Kettner believes the recent panic selling since the start of the U.S.-Iranian war will eventually play out in the same way as the market did during the COVID-19 pandemic and after tariffs were announced last April. In both cases, stock prices shrugged off all concerns and reached new all-time highs. “For us to be bearish on risk assets now, we would have to expect things not only to stay the same, but to get worse,” Kettner said. “There is a good chance that there will be new ups and downs in the coming days and weeks. But the most important thing for us is that the situation is no worse than what we saw in Monday morning trading.” The strategist expressed a preference for Asia and Europe over the United States, and said he looks for asset classes that are overshooting to the downside despite holding fundamentals. He is overweight Japanese stocks. “A simple playbook,” he wrote. “Buy the best-selling item since the Middle East conflict began.”
