27 Apr 2026
Key takeaways
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We’ve heard a lot about the “K shaped” economy in the US, but does it hold for global profits, too? Consensus profit growth has been ratcheting higher in most markets this year. But earnings breadth – the ratio of analyst upgrades vs downgrades, and a gauge of how broad-based upgrades are – hasn’t.
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Indian stocks have lagged global peers over the past 12 months – amid limited exposure to the AI boom, slowing profit momentum, the oil-supply shock, and a weaker rupee. What is the situation now?
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Investments totalling nearly USD4 trillion have flowed into emerging markets since the 2008 financial crisis, according to the IMF. Much of this has been non-bank debt and equity investments from hedge funds, pension funds, and insurance companies.
Chart of the week – Where next for policy?
This week’s meetings of the Federal Reserve (Fed), European Central Bank (ECB) and Bank of England (BoE) are likely to pass without any policy moves. But with the outlook still uncertain, investors will be listening carefully for clues on how policymakers are weighing up inflation and growth risks, although the central banks are likely to try and keep their options open.
Market expectations for rates this year look more balanced than they did a few weeks ago. At the height of US–Iran tensions and the oil price spike, markets were pricing in three to four rate rises in 2026 from both the ECB and BoE, including moves as early as April. That reflected initially hawkish messaging as policymakers sought to reinforce their inflation-fighting credibility in the face of another supply-driven shock. As Fed Governor Christopher Waller noted recently, while it may be logical to “look through” individual shocks, a run of shocks requires greater vigilance.
Since then, a partial retreat in oil prices, increased attention to European growth risks, and softer rhetoric from both the ECB and BoE suggest any tightening is likely to be limited.
In the US, markets were not so quick to price in hikes, reflecting the Fed’s dual mandate and the potential arrival of a more dovish Chair, Kevin Warsh, who was put through his paces by the Senate banking committee at his confirmation hearing last week. Even so, investors have largely priced out Fed cuts this year.
Market Spotlight
Despite uncertainty, stock volatility is normal
Markets feel chaotic in 2026, but equity volatility is actually… normal. Global stock market volatility typically sits in the mid-teens, which is where it is today. So, what’s the story?
First, is that geopolitical tensions create spikes in volatility, but they tend to fade fast. In 2026, stocks recovered from the geopolitics-driven drawdown a few days quicker than the historic average.
Second, volatility isn’t the best measure of risk, but it shapes behaviour. When investors throw in the towel at the lows, volatility is often the culprit. It encourages bad habits.
Third, the macro regime matters. Today’s world of supply shocks, elevated macro uncertainty, and concentrated indices, means episodic bursts of volatility are likely a recurring feature of investment markets.
In summary, volatility is the price of admission in 2026. Staying disciplined, diversified, and avoiding the behavioural traps remain the investor’s edge.
The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. Past performance does not predict future returns. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. You cannot invest directly in an index. Source: HSBC Asset Management, Factset, Bloomberg, Macrobond. Data as at 7.30am UK time 24 April 2026.
Lens on...
Not all profits are equal
We’ve heard a lot about the “K shaped” economy in the US, but does it hold for global profits, too? Consensus profit growth has been ratcheting higher in most markets this year. But earnings breadth – the ratio of analyst upgrades vs downgrades, and a gauge of how broad-based upgrades are – hasn’t. It points to top-heavy, or K shaped, profits growth.
Key to this is that technology sector profits are doing much of the heavy lifting – both in the US and beyond. Take emerging markets, where profit expectations for 2026 recently jumped to 45%, but earnings breadth is hovering near zero. Growth is concentrated in South Korea and Taiwan, where supersized profit growth of 100% and 50%, respectively, is being driven by AI capex and the race for AI dominance, propelled by enormous tax incentives in July 2025’s One Big Beautiful Bill Act.
The insatiable global appetite for memory chips helps explain the gap in profit growth between North and Southeast Asia. While capex spending continues, it offers resilience to the overall EM profit picture. But as traffic through the Strait of Hormuz opens up, EM profits growth should broaden out beyond tech – and be less K shaped.
Nifty moves
Indian stocks have lagged global peers over the past 12 months – amid limited exposure to the AI boom, slowing profit momentum, the oil-supply shock, and a weaker rupee. What is the situation now?
As half of India’s crude oil imports come from the Middle East, the government has cut fuel duties to offset higher oil prices. Meanwhile, the RBI held rates at 5.25% in April and signalled a growth-aware stance, and took measures to manage liquidity and curb FX pressures.
Despite resilient services activity, improving corporate and banking balance sheets, and reforms to support consumption and capex, profits could face near-term pressure from high energy prices. Nevertheless, the MSCI India now trades at around 20x forward P/E – around its 10-year average – and the premium to Asia has compressed.
Go with the flow
Investments totalling nearly USD4 trillion have flowed into emerging markets since the 2008 financial crisis, according to the IMF. Much of this has been non-bank debt and equity investments from hedge funds, pension funds, and insurance companies. These investors are sensitive to risk sentiment, and in times of stress that can make funding trickier and more expensive for EMs – but they are getting more resilient.
One reason for this is that while foreign inflows have risen, the share of foreign ownership in EM local bond markets has trended lower – with domestic investors playing a bigger role. This lowers the risk of a “sudden stop” in foreign flows. Second, more EMs are now in major global bond indices, where rising market caps have attracted “indexed” capital, which is often stickier than hot money. And third, rising foreign inflows are a vote of confidence in EMs, with many seeing improved policy credibility, with better-managed inflation, fiscal paths, and external buffers.
So, while foreign inflows into EMs are sensitive to global sentiment, some of these markets are proving to be increasingly resilient – which, in turn, should continue to boost their appeal to global investors.
Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. You cannot invest directly in an index. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Costs may vary with fluctuations in the exchange rate. Source: HSBC Asset Management. Macrobond, Bloomberg, Refinitiv, Factset. Data as at 7.30am UK time 24 April 2026.
Key Events and Data Releases
| Last week |
This week
For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector or security. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. You cannot invest directly in an index. Source: HSBC Asset Management. Data as at 7.30am UK time 24 April 2026.
Market review
Global equities posted modest declines as oil prices rebounded amid ongoing geopolitical concerns. In developed markets, the S&P 500 pulled back from a new high despite solid Q1 US earnings and continued AI optimism, while tech shares led the gains in Nikkei 225, which also hit a fresh record. In Europe, the Euro Stoxx 50 fell, and the FTSE 100 also ended lower. Other Asian markets were mixed: strong semiconductor earnings lifted Kospi to record highs, while Shanghai Composite edged higher. Conversely, Hang Seng and Sensex declined. In rates, US Treasury yields rose ahead of this week’s Fed policy meeting, alongside higher sovereign yields across Europe. In FX, the US dollar notched modest gains against major peers.
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