HSBC's bullish strategist turns cautious! Cuts US equity bets for the first time in months, downgrading to neutral ahead of the midterm elections.

Max Kettner, one of Wall Street's most bullish strategists, cut his equity bets for the first time in months, arguing that a sharp shift in investor sentiment calls for a more cautious approach ahead of next week's US midterm elections. The HSBC HOLDINGS chief multi-asset strategist, who had described his stance as "Max Bullish" in previous client notes, tactically lowered his equity allocation from maximum overweight to neutral on Monday, the first such move since mid-March. Citing investor concerns, he said a landslide Democratic win could lead to stricter AI regulation, while there is also a risk that the Iran war re-escalates. He also shifted his developed-market sovereign bond allocation to overweight, reflecting how quickly investors' characterization of market conditions is changing. "Given the constant back-and-forth in the narrative, we can no longer maintain the same level of confidence," Kettner wrote. "It feels like we need to update our views at least weekly now, if not more often." His concerns echo recent comments from other market participants. Bank of America strategist Michael Hartnett said investors' risk-averse mood most evident so far in rotation toward more defensive equity sectors could persist through November. Morgan Stanley's Michael Wilson argued that the midterm elections should serve as a "clearing event," and that once the risks they pose are removed, further stock market gains could be triggered. Kettner rose to prominence in recent years as one of the first to call the current equity bull market. He expressed concern about the recent rise in long-term oil prices: "It seems hard to imagine an immediate exit path in the short term." He remains bullish on next year's outlook, saying credible progress in resolving the Iran war over the coming months "would be an all-clear goldilocks backdrop for virtually every asset class." He also said positive free cash flow surprises from the US hyperscalers leading the AI buildout, along with a more dovish Fed, could help stocks continue to rise. Morgan Stanley's Michael Wilson offered a different timeframe. He characterized the midterm elections as a "clearing event," arguing that once the election results land, the removal of uncertainty itself could become a turning point for the market, and maintained his base-case S&P 500 year-end target of 8,000; but he also acknowledged that the adjustment could extend for days or even weeks after the election ends, with tightening liquidity being the biggest variable determining when the market bottoms. In other words, Wilson and Kettner have no fundamental disagreement on the tactical judgment of "reducing exposure before the election." The difference is that Wilson is more willing to treat the post-election removal of uncertainty as a trigger for re-adding exposure, while Kettner chooses to wait for clearer signals.