In its latest investment outlook entitled “Charting through turbulence with resilient portfolios” HSBC Global Private Banking suggests that investors should continue to expect the unexpected, even after the rollercoaster ride in the markets so far this year.

Investors should develop portfolios that are resilient to political and market surprises in order to navigate the uncertain economic climate, according to HSBC Global Private Banking's latest report targeted at high net worth and ultra-high net worth clients.

Despite market turbulence, HSBC assumes that the US will avoid recession and stagflation. The bank is preparing for slow but positive growth, volatile economic and earnings data, and mild interest rate cuts. This implies a mild risk-on tone, but with an emphasis on quality assets and managing short-term volatility.

The bank said investors should look at quality stocks and bonds, areas with policy support and opportunities supported by structural trends. On the equity side, HSBC is focusing on large caps and quality, a preference for services over goods and themes with long-term structural support. In bonds, HSBC is tapping into the broad opportunity set across sub-asset classes, but it is using a tactical and active approach. Swings in interest rate cut expectations and risk appetite allow managers to opportunistically lengthen or shorten duration, and move up or down the credit quality spectrum.

“Reduced tail risks of US-China decoupling should help stabilise business sentiment and investor confidence in Asia,” Cheuk Wan Fan (pictured), chief investment officer for Asia at HSBC Global Private Banking and Premier Wealth, added. “But given the outcomes of trade talks remaining uncertain, we expect Asian policymakers will continue to provide further monetary and fiscal stimulus to boost domestic consumption. We favour domestically oriented sectors and quality industry leaders.”

Asia
The private bank is focusing its equity strategy in China to tap into the DeepSeek-driven artificial intelligence innovation boom and high dividends. “China’s valuation attraction is clear, as it continues to trade at a substantial discount to emerging markets and global peers,” the bank said.

HSBC has been asked whether the reciprocal tariffs across much of Asia have killed off companies’ China+1 strategy, but it doesn’t think this is the case. Not all the production can be brought back to the US, either because of higher costs in the US, a lack of availability of expertise and labour, or the better economies of scale in Asia. HSBC sees India as a new winner as it is building up its manufacturing base. Media reports on Apple’s plan to source all US iPhones from India offered just one example of that rebalancing within the region. Consequently, HSBC is maintaining its overweight position on the Chinese, Indian and Singapore equity markets.

The lender is also overweight in gold and hedge funds as diversifiers but thinks that private credit and private equity play an important role here too. Private credit’s historical track record with lower default rates and higher recovery rates than public markets is important in the current environment. There are some interesting opportunities in secondaries too. Infrastructure meanwhile can provide relatively stable and inflation-linked cash flows, which will be welcome to investors in the current environment.

Going into the third quarter of 2025, HSBC Global Private Banking’s priorities include having broad asset exposure and capturing opportunities in artificial intelligence adoption. HSBC’s focus is on switching from tech hardware to software and AI adopters that benefit from AI proliferation and commercialisation. The bank thinks that interest in AI adopters will see a resurgence when there is a break from the geopolitical noise.

HSBC believes that a multi-asset approach can manage portfolio volatility amid uncertain markets. Alternative assets and volatility strategies also provide downside protection in equity, bond and currency markets. Amid global trade uncertainty, Asia provides attractive opportunities from domestic growth drivers and structural trends, particularly in China, India and Singapore.

“While we expect to see lower US growth this year, the economy should not slide into recession or stagflation. Earnings growth will likely be in the single digits, but expectations have already been reduced, and valuations are reasonable at around historical averages,” Willem Sels, global chief investment officer at HSBC Global Private Banking and Premier Wealth, said.