Max Kettner, one of Wall Street's most bullish strategists, is pulling back on his bet on stocks for the first time in months, arguing that sharp shifts in investor mood call for a more cautious approach ahead of next week's US midterms. The HSBC Holdings Plc chief multi-asset strategist, who has described his stance in previous client notes as "Max Bullish," on Monday tactically reduced his stock allocation to neutral from maximum overweight for the first time since mid-March. He cited investor worries over more stringent AI regulation in the event of a sweeping Democratic victory, as well as the risk that the Iran war may heat up again. He also flipped his positioning on developed-market sovereign debt, where he is now overweight.
"Given the constant narrative bingo we just can't have the same level of conviction any longer," Kettner wrote. "Right now it feels as if we have to update our views at minimum on a weekly basis, if not even more."
His concerns mirror recent comments from other market pundits. Bank of America Corp. strategist Michael Hartnett has said investors' risk-off mood, most evident so far in their rotation into more defensive parts of the stock market, is likely to continue well into November. Morgan Stanley's Michael Wilson, by contrast, said the midterms should act as "a clearing event," with the potential to trigger further equity gains once the risk they pose is out of the way. Kettner, who made a name for himself as one of the first to call the current bull run in stocks, also expressed concern over the recent rise in long-term oil prices. "An immediate off-ramp seems hard to imagine," he said.
Kettner remains bullish on the outlook for next year, saying credible progress toward resolving the Iran war in the coming months "would be an all-clear Goldilocks backdrop for virtually all asset classes." Positive free-cash-flow surprises from the so-called US hyperscalers leading the artificial intelligence build-out, along with a more dovish Federal Reserve, could help stocks keep climbing, he said.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing