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Business Insider
8 hours ago
- Business Insider
These 3 'pain trades' could catch investors off guard in the 2nd half of the year
Stock investors are operating on some assumptions that could be proven incorrect, HSBC said. The bank said it identified three "pain trades" if the US market bucks Wall Street's expectations. Strategists said they saw the potential for a melt-up in the stock market to continue. There are a handful of consensus views on Wall Street that risk being proven incorrect in the back half of this year, raising the risk for some traders betting on things like the impact of tariffs and the direction of US stocks. That's according to strategists at HSBC Global Research, who see a risk that markets may not react to headwinds like tariffs and the GOP tax bill in the way that most investors may be expecting. In a note to clients on Monday, the bank said it identified several " pain trades" if the market bucked expectations on Wall Street in the second half of the year. "A lot of views going into H2 have become quite consensus and widely-held. Therefore some of our sentiment and positioning indicators are showing increasing signs of stretched views. What if Q3 turns out to be the quarter where these widely-held views unwind though?" the bank wrote. The analysts added that they believed the US stock market could continue to see "broad-based melt-up" — a situation where risk assets keep moving higher — contrary to some of Wall Street's gloomier forecasters. Here are three of the largest pain trades the bank sees potentially impacting investors. 1. US stocks keep outperforming the rest of the world There's a growing view that the US stock market will underperform international stocks this year. Investors are mainly concerned that tariffs could hit corporate earnings and increase uncertainty in the US, which could hit high stock valuations. In a survey conducted by Bank of America in June, 54% of global fund managers said they believed international equities would be the best-performing asset over the next five years, compared to just 23% of investors who said they believed US stocks would be the top asset. But there are a few reasons the US could continue to dominate the world market, HSBC said. For one, corporate earnings may not be as affected by tariffs as investors are predicting. Strategists estimated that around 20% of the cost of goods sold, or goods that American firms need to make profits, are imported from other countries. Meanwhile, large-cap and mega-cap firms are benefiting from a weaker dollar, which could make US products more attractive to consumers abroad, HSBC said. HSBC said weekly announcements of stock buybacks from US companies also hit a record high after the first-quarter earnings season. "Yes the US equity market is expensive. That's because it makes the most money," strategists said. "We can easily envisage a backdrop where things like the big beautiful bill, potential efforts around deregulation coupled with further evidence of profitability benefits from AI leads to an even larger gap in return on equity between the US and RoW equities in the coming quarters." 2. The US economy avoids a recession Most investors also expect economic growth to slow sharply in the US and the broader global economy in the second half. But there are several indicators of economic expectations that have shown soft signs of a rebound in recent weeks, HSBC said. The Bloomberg consensus GDP forecast diffusion index, one measure of GDP growth expectations, perked up in June. High-frequency consumer spending datapoints have also shown a slight uptick, a possible sign that consumers are beginning to feel better about what's ahead. "Despite the calls for a slowdown, high-frequency data show that after a temporary slump in May, US activity has in fact recovered again in June," strategists said, adding there could be upside risk if political and economic uncertainty begins to decline and the unemployment rate remains low in the US. 3. The US dollar makes a comeback Most forecasters also don't expect the US dollar to recover in value anytime soon, given the uncertainty surrounding geopolitics and trade. The US Dollar Index, which weighs the value of the greenback against a basket of other major currencies, has declined 10% year-to-date. HSBC's base-case is that the dollar will remain "soft" in the second half of the year, but there are two ways the US dollar could stage a recovery, something that would be "surprising yet painful" to investors, strategists said. There's a large global shock that drives currency traders back to the US dollar. The US dollar saw a brief spike as conflict between Israel, Iran, and the US unfolded last month. US policy uncertainty and structural forces stop weighing on the dollar. That could indicate to markets that the narrative of US exceptionalism is returning, causing the dollar to trade more in-line with what interest rates would imply. In that scenario, the Dollar Index could strengthen to 102, HSBC estimated, implying a 5% increase from current levels.
Business Wire
9 hours ago
- Business Wire
Affluent Investors Double Allocations to Alternative Investments, HSBC Investor Snapshot Finds
NEW YORK--(BUSINESS WIRE)--HSBC's new Affluent Investor Snapshot 2025 reveals that affluent investors doubled their allocations to alternative investments over the past year. The trend looks set to continue, holding strong appeal into the future as investors seek to further diversify their portfolios. Around half of the global affluent investors in the survey of 10,797 individuals in 12 markets say they plan to own alternative investments within the next 12 months, doubling the current ownership level. Multi-asset solutions, private market funds, mutual funds and hedge funds are the most popular investment products as investors seek broader diversification. Private market funds are particularly popular, with 29% of investors planning to add them to their portfolios, while 20% intend to invest in hedge funds. Affluent investors globally have cut cash levels by nearly 40% over the past year, with younger generations driving the most significant reductions; Gen Z and millennials have cut their cash holdings from 31% to 17%. Younger generations are also leading the adoption of alternative investments, tripling their allocation to alternative investments within the past 12 months. 'As technology evolves and information becomes more readily available, investors report that social media platforms and banks remain their top information channels,' said HSBC U.S. Head of Wealth and Global Private Banking Racquel Oden. 'As individuals rank wealth advisors and family members as their top choices for investment advice, we remain focused on providing our best-in-class wealth management expertise to our clients.' Gold Shines as Safe Haven Alongside alternatives, gold has emerged as the standout asset class of the year, with allocations more than doubling from 5% to 11% of portfolios. This marks the largest portfolio allocation increase across other asset classes compared to last year. Similar to alternatives, the number of portfolios that include gold looks set to double over the next year, as one in every two affluent investors plan to invest in the asset. While physical gold remains a key safe haven amid macroeconomic uncertainty, with over 40% planning to own the asset within the next 12 months, digital gold has also been gaining traction, with 28% of investors expressing interest. Priorities Shift to Focus on Personal Wellbeing The survey also revealed a global shift in mindset, with investors prioritising vacation and leisure as the number one financial goal worldwide. Despite this shift, gaining wealth for financial security remains a priority across generations. Gen Z continue to focus on diversification when considering income, as well as their investment portfolio; their second biggest priority is creating additional, or multiple, revenue streams. About HSBC HSBC Holdings plc, the parent company of HSBC, is headquartered in London. HSBC serves customers worldwide from offices in 58 countries and territories. With assets of US$3,054bn at 31 March 2025, HSBC is one of the world's largest banking and financial services organizations. HSBC Bank USA, National Association (HSBC Bank USA, N.A.) serves customers through International Wealth and Premier Banking (IWPB) and Corporate and Institutional Banking (CIB). Deposit products are offered by HSBC Bank USA, N.A., Member FDIC. It operates Wealth Centers in: California; Washington, D.C.; Florida; New Jersey; New York; Virginia; and Washington. HSBC Bank USA, N.A. is the principal subsidiary of HSBC USA Inc., a wholly owned subsidiary of HSBC North America Holdings Inc. HSBC Innovation Banking in the U.S. is a business division with services provided in the United States by HSBC Bank USA, N.A.
Yahoo
13 hours ago
- Yahoo
This Analyst Just Raised His Broadcom Stock Price Target by 70%. Should You Buy AVGO Now?
The broader global semiconductor market is expected to expand by 11.2% in 2025, reaching a total value of $700.9 billion. These explosive growth figures underscore the massive opportunity for companies positioned at the intersection of artificial intelligence and semiconductor innovation. Against this backdrop of unprecedented industry expansion, Broadcom (AVGO) has emerged as a standout performer, with its AI semiconductor revenue surging 46% year-over-year to over $4.4 billion in the second quarter of 2025. The company's stock has rallied an impressive 79% in just three months, significantly outpacing the S&P 500 Index ($SPX). This remarkable performance has caught the attention of Wall Street analysts, with HSBC recently upgrading the stock and raising its price target by a dramatic 70%. Chevron Stock's 4.6% Dividend Yield and 1.67% One Month Short Put Yield Make CVX a Buy Tariff Dealine, Fed Minutes and Other Key Thing to Watch this Week SoFi Stock Is Betting on Crypto Again. How Should You Play SOFI Stock Here? Get exclusive insights with the FREE Barchart Brief newsletter. Subscribe now for quick, incisive midday market analysis you won't find anywhere else. The upgrade was driven by HSBC's growing confidence in Broadcom's Application-Specific Integrated Circuit (ASIC) business, with the firm revising its ASIC revenue estimates upward. But with such a meteoric rise already behind it, is Broadcom's best-in-class AI positioning worth the premium valuation, or has the rally run too far ahead of fundamentals? Let's find out. Broadcom (AVGO) is a leading semiconductor and infrastructure software company. The company is a dominant force in the Application-Specific Integrated Circuit (ASIC) market, focusing on high-performance computing, networking, and storage applications. Broadcom's stock performance has been nothing short of extraordinary, with shares rallying about 79% in just three months. Year-to-date, AVGO has gained approximately 19%. From a valuation perspective, Broadcom's trailing price-earnings ratio stands at 54x, representing a significant premium to the sector median of 23.3x. Broadcom's second quarter 2025 financial results exceeded analyst expectations across key metrics. The company reported record quarterly revenue of $15 billion, representing a 20% year-over-year increase and slightly surpassing analyst estimates of $14.95 billion. Adjusted earnings per share came in at $1.58, beating analyst estimates of $1.57 by a penny. Broadcom's AI semiconductor business stole the show, with revenue reaching $4.4 billion in Q2, a remarkable 46% year-over-year increase. This AI revenue now represents a substantial portion of the company's semiconductor segment, which generated $8.4 billion in total quarterly revenue, up 17% year-over-year. Infrastructure software revenue rose 25% year-over-year to $6.6 billion, driven by the successful VMware integration and strong adoption of subscription-based models. The company generated record free cash flow of $6.4 billion, representing 43% of total revenue, demonstrating the cash-generative nature of its business model. The company's most significant recent product launch exemplifies this strategic evolution: the Tomahawk 6 networking chip, which began shipping in June 2025. The Tomahawk 6 delivers the world's first 102.4 Terabits per second of switching capacity in a single chip, effectively doubling the bandwidth of any Ethernet switch currently available on the market. The Tomahawk 6 is designed to meet the demands of AI clusters with more than 1 million XPUs, positioning Broadcom at the center of the industry's most ambitious AI deployments. Simultaneously, Broadcom has cultivated an impressive portfolio of strategic partnerships with the world's most influential technology companies. The company serves as the 'pre-eminent ASICs co-partner' for major hyperscalers, with active collaborations including Meta (META), Apple (AAPL) , and OpenAI. These partnerships involve developing custom silicon solutions that these companies cannot easily replicate internally, creating substantial switching costs and long-term revenue visibility. According to analyst Mike Harrison from Redburn Atlantic, Broadcom maintains 'a strong pipeline of future customers and active involvement in multiple GenAI silicon programs.' The financial scale of these initiatives is substantial. HSBC analyst Frank Lee projects that Broadcom's ASIC revenue will reach $28.4 billion in fiscal 2026 and $42.8 billion in fiscal 2027. For the third quarter of its fiscal 2025, Broadcom anticipates revenues of approximately $15.8 billion. This guidance represents continued sequential growth and reflects management's confidence in sustained demand across both semiconductor and software segments. The company expects AI semiconductor revenues specifically to reach $5.1 billion in Q3, representing acceleration from the $4.4 billion achieved in Q2 2025. Analysts are very optimistic about Broadcom's future, with the 35 surveyed giving it a consensus 'Strong Buy' rating. The average price target is $293.83, which implies about a 6.5% upside from its current price. HSBC's dramatic price target hike — raising its target by 70% to $400 — has set the tone for heightened expectations. In summary, Broadcom stands out as a premier play on the AI infrastructure boom, backed by a fortress balance sheet, dominant market position, and a wave of analyst enthusiasm. Personally, I believe Broadcom's strategic positioning and execution make it one of the most compelling AI infrastructure investments for the next year. While the valuation is rich, the company's growth trajectory and analyst confidence suggest that the upside potential remains attractive — especially if AI adoption continues to accelerate. On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Sign in to access your portfolio
