HSBC has downgraded U.S. equities to 'neutral' amid growing uncertainty surrounding tariffs under the Trump administration, while raising its outlook for European stocks, which now hold an 'overweight' rating following Germany's easing of fiscal reforms. The S&P 500 index has seen a 6.1% drop from its peak due to concerns about a trade war negatively affecting corporate profits and growth. Analysts suggest that investor capital may start flowing toward Europe as these changes unfold.
"It is important to stress that we are not turning negative on US equities - but tactically, we see better opportunities elsewhere for now," said HSBC's Global Equity Strategist Alastair Pinder.
Morgan Stanley Equity Strategist Michael Wilson believes the S&P 500 could fall another 5% to 5,500 points by mid-year, before ending the year at around 6,500, which is a 12.7% upside from the benchmark index's last close.
The Trump administration's massive moves on trade and other policies have injected uncertainty, while a proposed $1.2 trillion European fiscal bazooka could shift investor capital away from the United States.
The S&P 500 has pulled back about 6.1% from its February 19 record high on worries that the trade war will hurt corporate profit and slow growth.
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