The Zhitong Finance App learned that Max Kettner, one of Wall Street's most bullish strategists, cut stock bets for the first time in months, believing that a sharp change in investor sentiment requires adopting a more cautious strategy before next week's US midterm elections. The chief multi-asset strategist at HSBC Holdings described his position as “Max Bullish” (maximizing bullishness) in previous client reports. On Monday, he tactically lowered his stock allocation from maximum overallocation to neutral for the first time since mid-March.
Citing investors' concerns, he said that if the Democratic Party wins a big victory, AI regulations may become stricter, and at the same time, there is a risk that the war in Iran will heat up again. He also changed the allocation of developed market sovereign bonds to overallocation, reflecting the rapid changes in investors' characterization of market conditions.
Kettner wrote, “As the story continues to change, we can't maintain the same level of confidence. Right now it feels like we need to update our opinion at least once a week, or even more often.” His concerns echo recent statements from other market players.
Bank of America strategist Michael Hartnett said that investors' risk aversion — most clearly reflected so far in rotation towards more defensive sectors of the stock market — is likely to continue until November. Morgan Stanley's Michael Wilson believes that the midterm elections should be a “clean-up event” and that once the risks posed by them are eliminated, it may trigger a further rise in the stock market.
Kettner has become famous in recent years for being the first to call out the current stock market bull market. He expressed concern about the recent long-term rise in oil prices: “It seems difficult to imagine an immediate exit channel in the short term.”
He is still optimistic about next year's prospects, saying that credible progress will be made in resolving the Iran war in the next few months, and “it will be a fully liberalized Golden-girl background for almost all asset classes.” He also said that if the US hyperscale cloud vendors leading AI construction are surprised by positive free cash flow, and the Federal Reserve is more dovish, it may help the stock market continue to rise.
Morgan Stanley's Michael Wilson offered an alternative time frame. He characterized the midterm elections as a “clearing event” (clearing event). He believes that after the election results are implemented, the elimination of uncertainty itself can become a turning point for the market and maintain the S&P 500 benchmark target of 8,000 points at the end of the year; but he also acknowledged that adjustments may continue for several days or even weeks after the election, and that tightening liquidity is the biggest variable that determines when the market will bottom out.
In other words, Wilson and Kettner have no fundamental differences on the tactical judgment of “lowering exposure before the election”. The difference is that Wilson is more willing to see the elimination of uncertainty after the election as a trigger for re-increasing positions, while Kettner chose to wait for a more clear signal.