{"id":51065,"date":"2025-09-29T17:48:08","date_gmt":"2025-09-29T17:48:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/51065\/"},"modified":"2025-09-29T17:48:08","modified_gmt":"2025-09-29T17:48:08","slug":"stock-market-outlook-5-risks-to-sp-500-investors-should-know-about","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/51065\/","title":{"rendered":"Stock Market Outlook: 5 Risks to S&P 500 Investors Should Know About"},"content":{"rendered":"

The stock market has been on a months-long rally<\/a> but the road ahead isn’t necessarily clear. <\/p>\n

On Monday, researchers at HSBC’s global investment team said they identified a handful of downside risks that could potentially “derail” the rally in stocks since President Donald Trump’s tariffs first rocked financial markets in early April.<\/p>\n

The bank said it remained “aggressively risk-on” overall and would continue to be overweight on US stocks<\/a>, but the recent run-up to all-time highs looks vulnerable on a few fronts, strategists and analysts said. <\/p>\n

Here are some of the largest risks the bank identified that could hit the market: <\/p>\n

1. The Fed gets hawish again <\/p>\n

\"Fed<\/p>\n

Fed Chair Jerome Powell<\/p>\n

Hu Yousong\/Xinhua via Getty Images<\/p>\n

The biggest risk facing stocks is that the Fed ends up being way more hawkish than investors anticipated, HSBC said.<\/p>\n

The bank pointed to the potential for the US economy to re-accelerate \u2014 a situation that could prompt the central bank to even raise interest rates<\/a> down the line.<\/p>\n

“Fed pricing remains far too dovish, in our view,” HSBC said. “The mix of growth re-acceleration, Fed rate cuts and positive effects from the OBBB opens the risk of markets flipping to the risk of rate hikes<\/a> towards the end of 2026\/H1 2027. Such a hawkish flip would be the key risk to our broad-based risk-on view,” strategists said.<\/p>\n

Investors aren’t expecting the Fed to raise interest rates anytime soon. Markets are pricing in an 89% chance of a rate cut next month <\/a>and a 68% chance of a cut in November.<\/p>\n

2. The AI trade flounders<\/p>\n

\"Rear<\/p>\n

Getty Images; Alyssa Powell\/BI<\/p>\n

There’s a chance the AI trade could lose momentum after a blistering rally for high-growth names in the space sice April lows. <\/p>\n

The overall market remains highly concentrated in tech stocks, <\/a>chiefly the biggest winners of the burgeoning AI trade. The top 10 companies in the S&P 500 now make up a whopping 54% of the broader index, according to a July analysis from Apollo Global Management.<\/p>\n

Related stories<\/p>\n

\"\"\/<\/p>\n

Business Insider tells the innovative stories you want to know<\/p>\n

\"\"\/<\/p>\n

Business Insider tells the innovative stories you want to know<\/p>\n

“We cannot deny the downside risk of the AI trade<\/a> fizzling out and putting pressure on risk assets overall,” the bank said, speculating that even if a sell-off were to be largely concentrated in the Magnificent Seven stocks<\/a>, it could spill over into “broad-based” weakness across risk assets.<\/p>\n

Researchers said they didn’t see this scenario as the base case, largely due to factors like tech investment<\/a> still rising, the bar for corporate earnings being lowered across the S&P 500, and corporate guidance getting more optimistic since tariffs were announced in April.<\/p>\n

3. Supreme Court slaps down tariffs <\/p>\n

\"Trump<\/p>\n

The Supreme Court is set to rule on the legality of Trump’s tariffs in early November.<\/p>\n

Andrew Harnik\/Getty Images<\/p>\n

The threat of tariffs rocked markets earlier this year. Now, the threat of a legal reversal of Trump’s sweeping import duties is also a risk, the bank said. <\/p>\n

The Supreme Court isn’t set to make a ruling on whether President Donald Trump’s Liberation Day tariffs are legal<\/a> until early November.<\/p>\n

Financial markets aren’t expected to be “overly concerned” about the ruling until then, HSBC said, but, should the tariffs be struck down, there could be a “near-term cross-correlated sell-off,” the bank said.<\/p>\n

“On the one hand, one could argue that equities should cheer such a ruling \u2014 after all, companies would have to be reimbursed and that’d be an unexpected earnings windfall,” researchers said. “We’re more concerned about such a ruling putting the fiscal deficit outlook<\/a> even more in jeopardy.”<\/p>\n

That scenario could result in long-end US Treasury bonds selling off, which could cause yields to rise toward the “Danger Zone<\/a>.”<\/p>\n

In previous notes, strategists have defined the “Danger Zone” as when the 10-year US Treasury<\/a> climbs above 4.7%. Should yields breach that level, that could cause a broad-based, but short-lived sell-off in risk assets, in the bank’s view.<\/p>\n

4. Investors get ahead of themselves<\/p>\n

\"Wall<\/p>\n

Michael M. Santiago\/Getty Images<\/p>\n

There’s a chance that investors become too optimistic about the direction of stocks, something that could trigger a contrarian sell signal<\/a>, HSBC said.<\/p>\n

“The combination of improving fundamentals alongside rate cuts coming through creates an especially bullish backdrop for risk assets. So, while our aggregate sell indicator is no longer flashing a warning sign that sentiment is too stretched, this could still reverse,” the bank said.<\/p>\n

Should that happen, any pullback would also likely be short-lived, the researchers said.<\/p>\n

4. The job market continues to slow <\/p>\n

\"Hiring<\/p>\n

Thomas A. Ferrara\/Newsday RM via Getty Images<\/p>\n

The US labor market<\/a> is a notable pocket of weakness in an economy that otherwise appears to be holding up well. <\/p>\n

Should payroll<\/a> data keep falling below expectations, that could cause “at least a short-term setback over the coming months,” the researchers wrote.<\/p>\n

“A marked softening of the labour market could spark expectations for more aggressive rate cuts from the Fed over concerns to its mandate of maximum employment. From a market perspective, a classic risk-off backdrop would dominate. Risk assets would be dragged down while DM sovereigns and other typical safe havens would outperform,” they said.<\/p>\n

But, even if the job market<\/a> were to weaken substantially, that would also likely be a short-term risk to stocks, strategists said, noting that the Fed was already expecting the economy to post weak jobs growth in the coming months.<\/p>\n","protected":false},"excerpt":{"rendered":"The stock market has been on a months-long rally but the road ahead isn’t necessarily clear. On Monday,…\n","protected":false},"author":2,"featured_media":51066,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[72,61,60,123],"class_list":["post-51065","post","type-post","status-publish","format-standard","has-post-thumbnail","category-markets","tag-business","tag-ie","tag-ireland","tag-markets"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/51065","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=51065"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/51065\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/51066"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=51065"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=51065"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=51065"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}