HSBC remains aggressively positioned in risk assets but has been fielding a recurring question from clients about what would prompt it to turn bearish.

Chief Multi-Asset Strategist Max Kettner said in a note on Thursday that several commonly cited risks rank low on his concern list. 

On earnings, he noted that consensus expects second-quarter U.S. EPS to dip slightly quarter over quarter, making the bar easy to clear. 

“Earnings expectations in the near term should actually be another upside catalyst given they should be easy to beat,” Kettner wrote.

On geopolitics, HSBC said energy prices have stabilized, and an escalation significant enough to override optimism from technology, AI, and potential earnings surprises would be required to weigh broadly on risk assets. 

On interest rates, Kettner explained that the U.S. front-end has already repriced around 30 basis points since the last Federal Open Market Committee meeting, making further hawkish surprises difficult.

HSBC flagged two higher-priority risks. First, sentiment and positioning, with the firm stating that a broadly positive resolution in the Middle East could spark a sweeping rally across equities and credit that triggers a sell signal in its positioning framework. 

“We’re more worried about any supportive news flow from the Middle East prompting a genuinely broad-based rally in equities and credit alike – which in turn could easily prompt a proper sell signal in our positioning framework,” Kettner wrote.

Second, a slowdown in technology and AI spending. HSBC mentioned that significant backlogs make a near-term deceleration unlikely, but lower memory prices from efficiency gains or China’s advance in the DDR5 market present a longer-dated risk.