HSBC Asset Management reports that global stock indices have demonstrated resilience in the face of the recent oil shock, with the most significant adjustments occurring in market valuations and risk premia rather than in headline index levels [1]. In the United States, a combination of weaker stock prices and robust corporate earnings expectations—particularly a likely strong Q1 earnings season and an upgraded 2026 profits outlook—has led to a compression in the S&P 500 market multiple, which now stands at approximately 20 times earnings [1].
The report notes that resilient profits and higher earnings yields have outpaced the rise in bond yields, resulting in an increase in equity risk premia [1]. Specifically, US real rates, as measured by long-term Treasury inflation-protected securities, have remained steady year to date at around 1.9% [1]. This stability in real rates has contributed to a higher equity premium, especially in some emerging markets [1].
HSBC concludes that expected equity returns have increased, even though this improvement may not be immediately apparent from price charts alone [1].
CONCLUSION
HSBC Asset Management highlights that despite recent market shocks, underlying adjustments in valuations and risk premia have improved the outlook for equity returns. Investors may find higher expected returns, particularly as earnings remain resilient and risk premia widen.