HSBC Strategist: U.S. Stocks Could See 5%-10% Pullback Before Midterm Elections
N.R. Finch
HSBC chief multi-asset strategist Max Kettner warns US equities face a 5%-10% correction in the one to one-and-a-half months after earnings season, but calls it a buying opportunity — not the start of a bear market.
Why is he saying it's time to tap the brakes?
Kettner has held his maximum overweight on equities since mid-March, but he now says the window between the end of earnings season and the midterm elections is the time to trim exposure.
His reasoning rests on two pillars: sentiment and positioning have climbed near the highs of the 2021 reopening trade, while US credit-card data show consumer spending starting to slow.
This means → the issue is not broken fundamentals — it is crowded positioning and stretched sentiment, vulnerable to any catalyst.
How much longer can the "Big Beautiful Bill" fiscal boost last?
Kettner notes the bill's fiscal stimulus is comparable in scale to the 2009 financial-crisis response, but most of it is front-loaded into the first half of 2026.
In plain terms = the big money has already gone out the door; the second half will not deliver another dose of the same size.
This reflects a deeper concern: markets are transitioning from "fiscal backstop" to "earnings-driven", and that handoff tends to bring volatility.
How do the midterms threaten tech?
Polls show the Senate race is a coin flip, and Kettner believes this raises doubts about the regulatory direction for AI and data centres.
He stresses the uncertainty weighs on the entire tech sector — not just the semiconductor-vs-hyperscaler split.
This means → until election results land, tech valuations may carry a political-risk discount even if company fundamentals hold up.
What comes after the pullback?
Kettner explicitly frames the 5%-10% correction as a buying opportunity, not a bear-market beginning.
His logic chain: September–October seasonal weakness + midterm uncertainty + overstretched positioning → pullback → re-enter after the election clears.
Within tech, he currently favours hyperscale cloud companies — they only need to avoid raising capex guidance further, or signal that free cash flow won't turn negative, to deliver a positive catalyst.
Put simply = for these giants, "no bad news" is itself good news — the bar for a positive surprise is very low.
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