Equity investors should look to reduce some exposure after this earnings season, according to HSBC Holdings Plc's Max Kettner, who warns that stretched sentiment, a fading fiscal impulse, and US midterm election uncertainty could trigger a pullback.

Kettner, the bank's chief multi-asset strategist, said current market positioning reflects excessive optimism that leaves little room for disappointment. With corporate earnings peaking and government stimulus waning, the risk-reward profile for equities has deteriorated.

The strategist highlighted that midterm elections historically introduce volatility, and this cycle's policy uncertainty around fiscal spending and regulation adds another layer of risk. He recommended investors use any near-term strength to rebalance portfolios toward more defensive sectors and increase cash buffers.