HSBC is rethinking the outlook for global equities amid rising macroeconomic concerns. The firm downgraded U.S. stocks to neutral in a Monday note and upgraded European equities. Global equity strategist Alastair Pinder noted that catalysts including tariffs and a changing view on NATO allies from President Donald Trump are stoking market volatility. The strategist's shift comes as U.S. stocks continued to sell off on Monday , bringing the S & P 500's losses over the past month to more than 6%. The Nasdaq Composite has tumbled more than 10% during that time, and the Dow Jones Industrial Average has shed 4.6%. Investors around the world came into 2025 optimistic about U.S. stocks, as the incoming Trump administration was expected to curb regulation and lower taxes, ultimately driving corporate profits higher. However, equities have been under pressure given Trump's tariffs on Canadian, Chinese and Mexican imports, which have been key drivers for worry over economic growth. Investors are signaling concern that a recession in the U.S. is now more of a possibility, especially as some recent data has signaled cracking in both the labor market and overall economy. Meanwhile, Trump's economic policies and unwillingness to continue supporting Ukraine in its war against Russia are sparking a sense of resilience in Europe, Pinder noted. "We started the year overweight emerging market equities on the assumption that tariff threats would drive bolder and bigger fiscal stimulus from China," he said. "What we underestimated was how the U.S.'s wavering support for NATO and Ukraine would trigger a watershed moment for the eurozone — with Germany expected to also follow through with sizeable fiscal stimulus." European stocks have outperformed their U.S. counterparts to start the year. The Stoxx 600 index has climbed 8% in 2025, while the S & P 500 is down more than 3%. The German Dax hit a record earlier this month and is higher by nearly 14% year to date. .STOXX .SPX YTD mountain STOXX vs SPX in 2025 President Trump recently shifted his rhetoric to account for the changing market sentiment. Trump now says "pain" is to be expected as he implements his tariffs and plans to downsize the federal workforce, and did not rule out the possibility of a recession this year when asked on Sunday . "It is important to stress that we are not turning negative on U.S. equities — but tactically, we see better opportunities elsewhere for now," Pinder added. Pinder noted that he expects corporate earnings to remain intact, despite a "complex" backdrop of tariffs. The strategist also said he is not quite ready to forecast a longer-term negative view on U.S. equities because of tariffs. "Prevailing uncertainty around tariffs could see US equities remain challenged in the next few weeks, but we are hesitant to turn too cautious on the medium-term outlook," Pinder said.
