Q2 / 2024
Shaping your investment portfolio
HSBC Perspectives
Opening up a world of opportunity
Contents
3 Foreword
4 Key data to watch
6 Investment themes
Four investment themes to help
shape your portfolio
8 Regional market outlook
Where should you invest your money?
10 Diversification 3.0
The “out-of-the-box” thinking
12 AI-related opportunities
Go well beyond the usual suspects
16 Building financial resilience
Protecting your loved ones’
Quality of Life
Foreword 3HSBC Perspectives Q2 2024
Favourable macro and structural drivers
support the outlook for equities and bonds
As we enter the second quarter, we see a brighter
outlook with the Fed rate cuts just around the
corner and markets being quite realistic about
the timing and pace of those cuts. Moreover,
fears of a global recession have faded and US
earnings growth has consistently been surprising
on the upside.
What does this mean for investors?
Bond investors were delighted to see the strong rally in
late 2023 as rates peaked, and the rally should resume
in expectation of falling rates in the coming months. At
this juncture, with bond yields still elevated, we see a
good opportunity to lock in current yields by extending
bond duration. Tight credit spreads and market
uncertainties around economic growth and geopolitical
risks mean that our preference for quality bonds stays
firmly in place.
The most significant change we made during Q1 is
our more positive view on equities. This is backed
by improved earnings and margins thanks to falling
costs and expected rate cuts, which encourages more
corporates and households to spend and invest. In the
US, we expect to see solid earnings growth exceeding
10% in 2024, well above its long-term average of 7%,
while earning growth in Asia ex-Japan is expected to be
double that of the US.
As China’s stimulus measures will take some time to
boost actual economic performance, we stick with our
geographical diversification in the region, capturing
the rise of ‘AI’ in Asia. AI in this context isn’t artificial
intelligence but refers to ASEAN and India, due to their
strong fundamentals and domestic drivers. We’re also
positive on South Korea on the growing demand for
memory chips globally, and we’ve recently upgraded
Japan thanks to its corporate reforms and the end of
its deflationary period. These opportunities led us to
raise our global equity allocation to overweight in Q1
by adding in particular to US and Japanese equities.
Our optimism for equities also lies in the rising structural
trends that have reshaped the world in which we
live. The use of generative AI (artificial intelligence),
robots and innovative technologies promises to be a
game changer to all aspects of life, boosting not only
technology but also healthcare, communications and
other industries that benefit from increased productivity
and new product development. Both the US and Asia
enjoy strong consumption power supported by wage
growth and accumulated savings, and lower interest
rates will help fuel the momentum further. The trends
of nearshoring of industry and North America’s
re-industrialisation are also accretive to job creation
and manufacturing in the US.
Sustainable investing is closely connected with all of
these themes. After two years of rising interest rates,
the return to policy easing should unlock more spending
from companies and governments on the path to a
low-emission world. Renewable energy and biodiversity
will be top priorities.
Finding the right balance between exploiting
opportunities and focusing on quality
In conclusion, we see a number of positive drivers for
investors, but our complex world also demands careful
attention to risks, including a busy election calendar.
While everyone’s eyes will be on the US election in
November, historical data seem to be in favour of
US equities during an election year. As usual, our
four investment themes aim to find the right balance
between risks and opportunities, with a focus on quality
holding the key.
In this issue, we’ve also included three insightful
articles that delve into the need for a higher level of
diversification, the booming AI-related opportunities
and the importance of building financial resilience to
protect our Quality of Life.
We hope you find our publication worth reading and
wish you a successful investment journey.
Willem Sels
Global Chief Investment Ocer,
HSBC Global Private Banking and Wealth
Source: HSBC Global Research as at 8 March 2024. Estimates and forecasts are subject to change. India inflation forecasts are fiscal year.
Source: Bloomberg, HSBC Global Private Banking as at 11 March 2024. Past performance is not a reliable indicator of future performance.
We expect economic growth in the West to bottom in Q1, followed by
a mild acceleration
Earnings momentum is healthy, with growing margins in the US and Japan as
productivity gains oset cost pressures
US company earnings are expected to rise almost 11% in 2024, boosted by big tech
earnings surprises
Key data to watch
USD Investment grade USD High yield EM USD Government bonds EM USD Corporate bonds EM Local currency bonds
0
2
4
6
8
10
12
Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 Jan-24
Yield to worst (%)
0
2
4
6
8
10
12
14
Margins (Earnings/Sales ratio)
Feb-10 Feb-12 Feb-14 Feb-16 Feb-18 Feb-20 Feb-22 Feb-24
MSCI USA MSCI Japan
17.2%
16.4%
15.9%
11.6%
10.9% 10.9%
8.7%
7.9%
5.0%
3.2%
-0.6%
-5.8%
-10%
-5%
0%
5%
10%
15%
20%
Communications
services
Tech Healthcare Consumer
discretionary
Financials US
equities
Industrials Utilities Consumer
staples
Real
estate
Materials Energy
Key data to watch 5HSBC Perspectives Q2 2024
Yields of investment grade bonds look more attractive than high yield. We continue
to focus on global investment grade and government bonds
4 Key data to watch HSBC Perspectives Q2 2024
Source: LSEG, HSBC Global Private Banking as at 20 February 2024. Past performance is not a reliable indicator of future performance.
Source: FactSet, HSBC Global Private Banking as at 20 February 2024. Past performance is not a reliable indicator of future performance.
GDP Inflation
2023f 2024f 2023f 2024f
World 2.7 2.4 6.4 6.1
US 2.4 1.7 4.1 3.4
Eurozone 0.5 0.5 5.4 2.6
UK 0.1 0.6 7.3 2.2
Japan 1.9 0.8 3.3 2.6
Mainland China 5.2 4.9 0.2 0.5
India 7.7 6.0 5.3 4.6
6 Four investment themes
Four investment themes
to help shape your portfolio
1. Lock in current yields for longer ahead of rate cuts 
Bonds tend to do well after rates peak as investors seek to get ahead of the coming wave of central bank
easing, which helps explain the strong rally in late 2023. As we’re approaching the first rate cut, with the Fed
and the European Central Bank expected to move in June and the Bank of England soon after, bond prices
should rise further. Locking in still attractive yields before it’s too late is the right thing to do. This can be
achieved by putting cash to work in bonds and extending bond duration.
No matter where we sit in the interest rate cycle, bonds play a key role in any portfolio because they provide
diversification and predictable income streams. Within the bond market, we focus on quality as global
growth is lower than usual and geopolitical risks remain elevated. While Treasury yields remain high, credit
spreads haven’t widened suciently to compensate for even a small pickup in defaults. This makes it hard to
justify taking on extra risk, supporting our preference for investment grade over high yield bonds.
Indian local currency bonds are another bright spot due to their low correlation with other bonds and
attractive yields. India’s bond market allows investors to tap into the country’s strong growth momentum
and is enjoying strong inflows following the inclusion of Indian bonds in EM bond indices.
• We overweight longer duration (7-10 years) developed market government bonds including US
Treasuries, while maintaining a medium duration preference (5-7 years) for investment grade
bonds, preferably in US dollars.
• In Asia, we prefer selected banks, Indonesian quasi-sovereign bonds, Macau gaming and
Chinese IT, media and telecom. Indian local currency bonds remain attractive for diversification
and yield enhancement.
2. Increase equity exposure to growth leaders to boost returns
We’ve become more positive on equities thanks to stronger-than-expected economic growth, strong
corporate earnings growth and a favourable rate outlook. In the West, the US is the most resilient and has
the strongest earnings power. Rate cuts should improve margins, which are growing steadily. US equities
tend to do well not only before the first rate cut, but they have also outperformed in 15 of the past 20
presidential election years.
Asia sees divergent growth, with India and ASEAN (particularly Indonesia) leading the pack. Supply chain
diversification, young demographics and strong investment flows are shared drivers for the two countries.
India is also backed by its digital transformation and services exports; Indonesia benefits from rapid
urbanisation and investments flowing into the EV sector. South Korea is also poised to gain from the digital
transformation and a recovery in global demand for memory chips.
The latest addition to the list is Japan, where we see the reflation trend, corporate governance reforms
(including higher dividend distributions) and the AI investment boom translating into structural opportunities.
Monetary policy normalisation will also strengthen the yen, adding to returns for foreign investors.
3. Ride on cyclical and structural trends to diversify sector exposure
In the US, strong labour markets, real wage growth and falling inflation should support healthy consumer
spending, which accounts for 70% of GDP.
Structurally, US leadership in technology and the wide application of generative AI and automation are
opening up huge opportunities across industries. Companies at the forefront of the AI development are
delivering strong earnings growth, albeit at higher valuations. Healthcare innovation is another growth driver
through AI and the use of robots, as well as new product development. Both the nearshoring of industry and
the North American re-industrialisation are boosting manufacturing and job creation.
The consumption story is also playing well in Asia, supported by accelerating private wealth and strong
domestic spending power. Many internet leaders are also benefitting from their large consumer retail
operations. Asia’s leadership position in e-commerce and semiconductor manufacturing helps sustain the
growth momentum.
Although we remain defensive in Europe amid sluggish economic growth, new pharmaceutical products
continue to lift sales expectations there.
• We overweight US equites and diversify our Asian exposure into India, Indonesia, South Korea
and Japan.
• We prefer large-cap companies with leading brands, strong cash flows and manageable debt.
• We see structural investment opportunities focused on sustainable energy such as renewables,
hydrogen, storage and carbon capture.
• Global agreements on biodiversity will have a meaningful impact in the food, pharmaceuticals
and cosmetics industries.
• We maintain a cyclical tilt in the US, extending our favourites beyond technology to consumer
discretionary, industrials, communications, financials and healthcare.
• We remain overweight on Asian technology, consumer discretionary and staples, communications
and utilities. In Europe, we prefer technology, financials, energy and healthcare.
4. Tap into sustainable growth through clean energy and biodiversity
According to the United Nations (UN), 2023 was the hottest year on record, with extreme weather events
on the rise. COP28 confirmed how far the world is falling short of climate change goals. Yet amid the gloom,
investments into a sustainable and more equitable world continue to grow, supported by government policies
and better regulatory frameworks.
Global greenhouse gas emissions need to fall by 43% by 2030 to get the goals of the Paris Agreement back
on track and keep the world on a path to net zero by 2050. Renewable energy is positively prioritised as
investments in low-carbon energy topped USD1 trillion in 2023. Rate cuts should also lower capital costs,
encouraging companies to raise spending on alternative energy solutions such as solar, wind, biofuels and
hydrogen as well as innovative technologies to increase productivity and reduce their carbon footprints.
Biodiversity and the circular economy are also coming into sharper focus with the recognition that the rapid
loss of species poses a systemic threat to the global economy. Increased regulation, the expansion and
funding of the UN’s global biodiversity framework, and growing investor attention are driving companies to
adapt their operations to mitigate their impact on nature. Companies that preserve biodiversity oer investors
the potential to access growth, provide relative outperformance and support long-term change.
Four investment themes 7HSBC Perspectives Q2 2024HSBC Perspectives Q2 2024
Regional market outlook
Asia (ex-Japan)
China’s economic growth continues to face headwinds
stemming from the property market. Government support
measures should help reduce the downside for the
economy and the stock market, but investors will want to
see stronger growth before stocks can rally sustainably.
In the meantime, we continue to diversify our Asia
exposure into India, Indonesia and South Korea.
Positive demographics, digitalisation and changes to
the global supply chain are helping India and support
the current high valuations, in our view. Following the
elections in February, Indonesia should see renewed
economic activity and is benefitting from the net zero
transition. South Korea is well placed to tap into the
strength of technology demand linked to AI.
Note:
The above comments reflect a 6-month view (relatively short-term) on asset classes for a tactical asset allocation. For a full listing of HSBC’s
house view on asset classes and sectors, please refer to our Investment Monthly issued at the beginning of each month.
Where should you invest
your money?
Japan
We’re positive on Japanese stocks since a weak yen
and rising inflation are helping companies generate
strong earnings. But the tailwind is more structural than
that: companies have been urged by the stock exchange
to improve corporate governance, which is already
leading to higher dividend payouts.
Rising wages are lifting consumer spending and
creating a mindset that Japan has finally left its
deflationary period, which is a clear positive for
stocks. For bond markets, higher inflation means that
the central bank will soon raise rates to zero or even
positive territory, which will hurt bond returns. This
could also lead to mild JPY currency strength.
Eurozone and UK
Countries in the Eurozone and UK have either just gone
through a mild recession or barely escaped one. The
mild positive is that growth may have bottomed and
we could see a very gradual economic pickup from
here. That said, fiscal challenges in Europe, protests
and strikes, energy dependence and tail risks related to
geopolitical conflicts on Europe’s doorstep present risks
to stock markets.
In spite of low valuations, we maintain our neutral view
on the UK and our underweight view on the Eurozone
until we see improved cyclical momentum.. We expect
the European Central Bank to cut rates in June (like the
Fed) and the Bank of England to follow in Q3.
United States
US stocks remain our main overweight in the West as we
believe the country benefits from cyclical and structural
resilience. A strong labour market and falling inflation
benefit the consumer, while re-onshoring is positive for
industrials and the US technology sector is world-leading.
We’re not too concerned about high valuations because
US companies are generating strong earnings and are
able to expand their margins thanks to falling costs and
their strong market position.
The presidential elections may create some volatility
after the summer, but for now, we focus on the market’s
strong fundamentals as the election is very dicult to
call. We continue to like technology but also diversify
into other sectors such as consumer discretionary,
communication services, healthcare, industrials and
financials as we see opportunities across the market.
EM Latin America and EM EMEA
We maintain an underweight on European emerging
markets, in line with the underweight on the Eurozone,
since many of them suer from the same issues.
Latin America has more favourable drivers and hence
we overweight the region, including Brazil and Mexico.
Rate cuts in Brazil are already helping market sentiment
and downside risks to Brazil’s commodity-heavy
exports have decreased as China takes steps to boost
its economy. Mexico is benefitting considerably from
trade with the US and is now a larger US trading partner
than China. Changes to the global supply chain benefit
Mexico as many US companies are actively nearshoring
their production.
8 Regional market outlook Regional market outlook 9HSBC Perspectives Q2 2024HSBC Perspectives Q2 2024
Diversification 3.0
The “out-of-the-box”
thinking
Our investment process is firmly committed to
diversification. This is usually seen as a necessary step
to help manage volatility, but we also see diversification
as a way to broaden the opportunity set. Both objectives
point to the need to move from “lazy” diversification
using just stocks and government bonds to an active
search for diversification including sub-asset classes
within fixed income and equities.
The challenge
During most of the period following the 2000 dot-com
crash, government bonds have been the go-to asset
for portfolio diversification. The correlation between
the S&P 500 and a diversified basket of US Treasuries
averaged -0.3 during this period. This easily achieved
diversification led to a historically exceptional outcome
for simple stock-bond portfolios in the 20-year period.
Looking at a longer historical sample, as seen in Chart 1,
the correlation between stocks and bonds has been
mostly positive. While many investors may anchor their
expectations to the period between 2000 and 2020
simply because they’ve experienced it first-hand, the
data show that this was an outlier. Importantly, the
correlation has significantly increased in the post-COVID
world. Relying only on government bonds to achieve
diversification thus no longer seems sucient, and we
need to look for opportunities elsewhere.
High inflation and a big focus on central banks’ actions
are to blame for the pickup in correlation, in our view.
And although inflation is down from its peak, it may
well remain higher than in the past decade. We believe
that we’re now back in the regime where the correlation
remains mostly positive for the foreseeable future.
The solution
How can investors diversify their portfolios when stocks
and bonds are moving in tandem? The simple answer is
to look for additional sources of returns that aren’t
as tightly correlated. We broaden the opportunity set
in Chart 2, which represents the mean-variance frontiers,
based on our latest capital market assumptions. We start
with investment grade credit, but we need to actively
seek additional diversification opportunities, and first
examine the benefit of adding other income-generating
asset classes and strategies. Indeed, we can observe
that better portfolios (Set 2) can be built by expanding
the universe to include high yield, emerging
market debt, securitised bonds and catastrophe
bonds as well as covered call strategies.
Where appropriate and available to investors, we like to
consider these strategies as a means of reducing risk and/
or increasing the expected portfolio return over the long
term. In our view, they bring dierentiated sources of
return to the portfolio without sacrificing liquidity.
We note that we could make a similar observation for
equities: while equities overall are more highly correlated
with bonds than usual, the correlation between dierent
equity sectors, and the correlation between dierent
geographical equity markets is relatively close to the
historical average. So, diversifying within the sub-
parts of global stock markets is important.
Some multi-asset funds oer exposure to these
alternative sources of income. While high yield and
emerging market debt are more commonly seen in the
retail space, it may be worth providing an explanation
of securitised bonds, catastrophe bonds and covered
call strategies.
Securitised bonds are an asset class which consists
of bonds or instruments that comprise cash-generating
assets such as residential and commercial mortgage
loans, auto loans and credit card loans. They normally
oer a yield premium over traditional bonds and
their yields usually follow the moves in interest rates.
Catastrophe bonds or insurance-linked securities
(lLS) are structured to transfer insurance risks that are
typically related to natural disasters to capital markets
participants in return for higher levels of income.
Covered call strategies aim to generate additional
income by selling call options on a stock holding. All of
these investment instruments are closely managed by
professional managers.
Coming back to the multi-asset approach and Chart 2,
even more diversification can be achieved by introducing
less-liquid allocations across private markets and
hedge funds (Set 3). Key private market allocations
include private equity and credit, real estate and
infrastructure. However, they’re intended more for
institutional or private banking customers.
Conclusion
As we return to the “old normal” regime of positive
correlation between defensive fixed income and equities,
portfolio diversification requires a more nuanced
approach and some “out-of-the-box” thinking. Some
multi-asset funds can be a cost-eective option to gain
exposure to a wide range of investments that retail
customers may find hard to access on an individual basis.
Chart 1: Historical stock-bond correlation
Chart 2: Unconstrained ecient frontiers for
various sets of asset classes
Source: Bloomberg, University of Lausanne, HSBC Global Private Banking
as at February 2024. The red line represents a 3-year rolling correlation
between the monthly returns of US stocks and US Treasuries.
Source: HSBC Asset Management, HSBC Global Private Banking as at
February 2024. The projections are based on our latest expected returns
with a 10-year horizon. Set 1 includes developed and emerging market
equities, investment grade credit and global government bonds. Set 2
includes Set 1 plus global high yield, hard and local currency emerging
market debt, catastrophe bonds and covered call strategies. Set 3 includes
Set 2 plus private equity, private credit, direct real estate, infrastructure and
hedge funds.
10 Diversification 3.0 Diversification 3.0 11HSBC Perspectives Q2 2024HSBC Perspectives Q2 2024
Stock-bond correlation
-1
-
0.8
-
0.6
-
0.4
-
0.2
0
0.2
0.4
0.6
0.8
1
1929
1934
1939
1944
1949
1954
1959
1964
1969
1974
1979
1984
1989
1994
1999
2004
2009
2014
2019
2024
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
2.0% 4.0% 6.0% 8.0% 10.0%
Expected return
Volatility
Set 1 Set 2 Set 3
Stanko Milojević
Head of Asset Allocation,
HSBC Global Private Banking and Wealth
Key takeaways:
• Diversification is crucial for managing
volatility and expanding the opportunity
set. However, using stocks and government
bonds may no longer be sucient due to
increased correlations.
• Better diversification can be achieved by
allocating to additional income-generating
asset classes and strategies.
• Some multi-asset funds oer a cost-
eective option as their allocations can help
generate alternative sources of income that
retail investors may find hard to access by
themselves.
AI-related
opportunities
Go well beyond the
usual suspects
Robotics, the linchpin of an automated future, is
experiencing an unprecedented upswing. With the
number of industrial robots in operation reaching 3.5
million units in 2022 and an estimated value of USD15.7
billion, the automation landscape is ripe for exploration
and expansion. This is particularly pronounced in Asia,
which saw 381,000 installations of industrial robots in
2021, up from 89,000 a decade before.
So far, the focus of AI has been on the enablers –
principally in the chip industry and the cloud; you could
be welcomed by companies. But we don’t think of AI
as a job killer. New jobs will be created as a new
industry kicks o. And for most people, AI can be seen
as a “co-pilot” which doesn’t replace them but makes
them more ecient.
The agricultural industry, especially in developed
markets, is witnessing a sea change with the advent of
AI-driven automation. From GPS-controlled tractors and
harvesters to sophisticated soil and crop management
using drones and AI, the face of modern agriculture
is changing swiftly. More than 60% of companies in
agriculture and F&B plan to use AI by 2025.
AI and automation can play a pivotal role in helping
farmers adapt to changing climate conditions as they
rethink the farming methods to minimise the impact on
the environment and biodiversity.
Many farmers are embracing new technologies including
drought- and pest-resistant seeds, micro-irrigation
that reduces water usage, and methane-reducing
feedstock. AI is helping traditional farms at all stages
of the agricultural process, from initial livestock or crop
selection, monitoring and husbandry to treatments – and
much more. Sensors, tags and cameras all facilitate
optimisation of the processes and raise productivity.
These same technologies are also being applied in
vertical farms in cities to grow high-value crops for
restaurants and consumers in warehouses or disused
underground spaces.
Incorporating sensors, cameras, batteries and
antennas into a wider array of products and locations
is an area opening new avenues for growth. This
development significantly augments the data flow
into AI programmes, thereby enhancing their eciency
and eectiveness.
Miniaturisation has been a theme in the tech sector
since the 1970s as the semiconductor industry
crammed more and more onto its silicon chips. As
products and services have digitalised, their physical
dimensions have shrunk, sometimes to nothing.
Miniaturisation and digitalisation of products has
facilitated greater integration of technologies, which
enables AI to fully exploit its potential. AI programmes
can use smartphones, sensors, cameras, microphones,
speakers, positioning data and internet connections to
fully interact with users and their situations.
Kevin Lyne-Smith
Managing Director, Global Head of Equities,
HSBC Global Private Banking and Wealth
12 AI-related opportunities AI-related opportunities 13HSBC Perspectives Q2 2024HSBC Perspectives Q2 2024
Global annual installations of industrial robots
400
387
390
526
553
593
622
662
718
0
100
200
300
400
500
600
700
800
2017 2018 2019 2020 2021 2022 2023e 2024e 2025e 2026e
Thousands
Source: World Robotics 2023 report, IFR, September 2023.
Robots installed per 10,000 employees
1012
0
200
400
600
800
1000
1200
South Korea
Singapore
Germany
Japan
Mainland China
Sweden
Hong Kong
Switzerland
Taiwan
United States
730
415
397 392
343
333
296 292 285
Source: International Federation of Robotics, March 2024.
think of this as the infrastructure around AI.
But there will also be huge growth in software,
which will provide the solutions to use AI in real life
applications. Smart users of AI will enhance their
productivity and their innovation, with rapid gains in
areas like sales administration, marketing, operations,
coding and research.
There are applications and nuances across sectors.
For example, in healthcare, the application of AI and
robotics can revolutionise monitoring, tracking, data and
image analysis, and sample testing. And as the financial
sector gravitates towards online consumption, AI can
streamline processes such as identity verification and
applications for insurance, bank accounts and credit
cards. Moreover, the deployment of large-language-
model AI software in online chat functions can enhance
customer service experiences while concurrently
reducing corporate costs.
At a time when labour markets are tight and high wage
growth is putting pressure on costs, eciency gains will
Key takeaways:
• The integration of generative AI and robotics is
experiencing rapid growth, with more use cases
than ever before. More intelligent, automated
products and services can take on a broader
array of tasks.
• Many industries – from food production to
healthcare – are using automation to avoid
tedious and labour-intensive manual inspections.
This will boost productivity and services while
also improving consistency and quality.
• Advances in AI, automation and semiconductor
technology will generate innovation and
earnings growth across sectors, expanding
opportunities beyond tech-related stocks.
roles evolve. The infrastructure will also need to be built
out to deal with the rapid acceleration of data use. This
includes data centres, for example, which continue to
be a major growth area in our view.
The potential for businesses to improve productivity
and enhance products and services is clear. But the
gains for consumers are evident too, as services can be
oered eciently 24/7 and product quality continually
improved. The opportunity now lies in broadening the
use cases for these technologies in order to reduce cost
to serve and increase eciency. And for investors, this
means that when thinking about AI, we need to think
beyond the usual suspects.
CIO Academy 15HSBC Perspectives Q2 2024
The intertwining of AI with other technological
advancements has broadened the scope and
applicability of automated products and services.
Simultaneously, the pressure of labour shortages
and escalating costs is spurring a renewed wave of
investment in robotic automation, rendering potential
investment returns increasingly attractive. The growth
of 5G, cable and networks of low-earth-orbit satellites
has expanded data capacity dramatically while reducing
latency, setting the stage for an AI and robotics-led
industrial revolution.
As these new applications are embraced, the workforce
will need to adapt as new jobs are created and existing
Earnings growth in robotics and AI has been consistently above that of US equities
and this should continue
10
15
20
25
30
35
40
Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24
12-month forward earnings growth (%)
Robotics and AI Index
US equities
Source: Bloomberg, HSBC Global Private Banking as at 4 March 2024. Past performance is not a reliable indicator of future performance.
14 AI-related opportunities HSBC Perspectives Q2 2024
Building financial
resilience
Protecting your loved ones’
Quality of Life
With all the unexpected changes life can bring,
safeguarding the financial stability of your loved ones
takes centre stage. The HSBC Quality of Life Report
unpacked the vital connection linking mental and
physical wellness with financial fitness. This shows how
taking steps to enhance your financial resilience can
ultimately nurture a brighter future and a better Quality
of Life for all your loved ones. By exploring the creation
of a safety net for life’s uncertainties, we can prioritise
family financial security and protect those we cherish.
Putting family financial security first
As we navigate shifting family dynamics and societal
changes, it comes as no surprise that 47% of
respondents in our report continue to rank “supporting
family financially” as one of their top priorities.
This sentiment echoes across generations as most
people share common objectives in long-term financial
planning. They aim to prepare for unexpected events
such as illness or accidents, provide for their family
in the event of their passing, transfer wealth to their
children, and safeguard the interests of their spouse
or partner.
The cornerstone of a better Quality of Life
The report highlights a critical finding: the close
relationship between physical and mental wellness and
financial fitness. Financially fit individuals are four times
more likely to exhibit higher states of mental well-being,
and twice as likely to excel in physical wellness.
These insights underscore the profound impact that
financial stability and protection can have on our overall
peace of mind, benefitting not only ourselves but also
our loved ones. Ensuring your family’s financial security
is a key means of improving their Quality of Life. Taking
early action and investing in proper protective measures
lays the groundwork for future prosperity and shields
against unforeseen events.
Protecting yourself and those you love
So, what can we do to improve our level of protection
and financial resilience? Here are four strategies for
managing life’s risks:
Risk avoidance – choosing not to ski to avoid a skiing
injury may be eective, but could ruin your winter
getaway. Some risks in life – such as falling ill – just
cannot be avoided, while the cost of avoiding others
may outweigh the potential benefits.
Risk reduction – taking steps to minimise the
likelihood or impact of a risk can significantly contribute
to protection. For example, wearing a helmet while
cycling reduces the risk of severe injuries.
Risk transfer – shifting financial risk to another party
through insurance or contracts can provide a safety net,
for example by buying protection against a trip being
cancelled.
Risk retention – accepting and budgeting for risks
by building an emergency cash buer or fund to cover
unforeseen costs such as car repairs or minor medical
treatments.
None of the above can eliminate uncertainty from
your life, but they enable you to better withstand
the negative impact of critical events. Choosing the
appropriate strategy is vital, but it’s equally important to
regularly review and adjust your financial and protection
plan according to your evolving circumstances. This
proactive approach safeguards against unpredictable
events.
Here are four practical steps to better protect
yourself and your family:
Identify your priorities – gain a deep understanding
of what truly matters for your future and prioritise
accordingly.
Assess your finances – review your income,
expenses, assets and liabilities to assess your financial
stability and identify any gaps that need attention.
Plan for the whole family – create inclusive plans
that address the unique needs of each family member,
whether it’s children’s education or preparations for
retirement.
Talk about the future – engage in meaningful
conversations with your loved ones and consult
with a financial planning specialist who can give you
insights into what matters most for your family. This
collaborative approach helps you better prepare for the
unexpected.
It’s never too early to safeguard your family’s future.
A robust protection plan helps instil confidence in
yourself and your loved ones, providing the peace of
mind that allows you to explore new opportunities and
pursue dreams together. By achieving financial resilience,
you empower your family to thrive and enjoy a better
Quality of Life.
16 Building financial resilience Building financial resilience 17HSBC Perspectives Q2 2024HSBC Perspectives Q2 2024
Jenny Wang
Global & Asia Head of Personal and Premier
Wealth Solutions, HSBC Wealth and
Personal Banking
Key takeaways:
• Amid the competing and diverse demands
life throws at us, it’s vital to stay focused
on ensuring the financial security of loved
ones and protecting them from unexpected
events.
• There is a close link between financial
security and Quality of Life. Improving
your financial resilience makes you much
more likely to experience better mental and
physical well-being.
• It’s important to regularly review and adjust
your investment and financial protection
plans, employing strategies to mitigate the
impact of life’s uncertainties.
Contributors
Willem Sels
Global Chief Investment Ocer, HSBC Global Private Banking and Wealth
Willem joined HSBC Private Banking in 2009, where his career has spanned Fixed Income,
Investment Research, leading the UK Investment Group and most recently the role of Chief
Market Strategist. He chairs the Global Investment Committee of the Global CIO Oce for
Private Banking and Wealth. Willem holds an MBA from the University of Chicago and an
MSc from the University of Louvain (Belgium).
Lucia Ku
Global Head of Wealth Insights, HSBC Wealth and Personal Banking
Lucia leads the Wealth Insights function with a focus on the development of its content
strategy and delivery of key content initiatives to drive Insights consumption across dierent
channels. She is also responsible for leveraging the firm’s research capabilities to enhance
our Insights oering to wealth clients in Asia and globally. Previously, she worked at a
number of banks and asset managers, including HSBC Asset Management.
Ivy Suen
Senior Wealth Insights Manager, HSBC Wealth and Personal Banking
Ivy leads the creation of market insights, thought leadership initiatives and the delivery of
an ESG-focused content strategy as part of HSBC’s core investment philosophy. Previously,
she launched initiatives for HSBC Premier and International in Hong Kong, connecting
clients with tailored multi-channel services and initiatives for their portfolio growth.
Stanko Milojević
Head of Asset Allocation, HSBC Global Private Banking and Wealth
Stanko is responsible for all quantitative aspects of Global Private Banking’s investment
strategy, including asset allocation and systematic trading. Prior to joining HSBC, Stanko was
an investment strategist at Mercer, where he developed quantitative investment strategies
and portfolio construction solutions for institutional investors around the world.
Kevin Lyne-Smith
Managing Director, Global Head of Equities, HSBC Global Private Banking and Wealth
Kevin heads equities globally and is a member of the Global Investment Committee for
Private Banking and Wealth. He joined HSBC in 2014, having previously held several senior
positions at Credit Suisse and Julius Baer in Zurich. Prior to that, he worked at Serono,
GlaxoSmithKline and Ford. Kevin holds a degree in pharmacology and toxicology from
University College London and an MBA from the University of Warwick.
Jenny Wang
Global & Asia Head of Personal and Premier Wealth Solutions, HSBC Wealth and Personal Banking
Jenny leads the development and delivery of retail wealth strategy across HSBC’s wealth
proposition, financial planning, product strategy, and omni-channel wealth solutions. She
joined HSBC in 2001 and has held key leadership positions in distribution, proposition,
products, analytics and marketing in both retail banking and wealth management. Jenny
holds an Executive MBA from China Europe International Business School in Shanghai and
is a chartered financial analyst.
Alternative investments: a broad term referring to
investments other than traditional cash and bonds. They
may include real estate, hedge funds, private equities and
commodities investments, among other things. Some of these
investments may oer diversification benefits within a portfolio.
Asset class: a group of securities that show similar
characteristics, behave similarly in the marketplace and are
subject to the same laws and regulations. The main asset
classes are equities, fixed income and commodities.
Asset allocation: the allocation of funds held on behalf of
an investor to various categories of assets such as equities,
bonds and others, based on their investment objectives.
Company fundamentals: the intrinsic value of a company
as analysed by looking at its revenue, expenses, assets,
liabilities and other financial aspects.
Diversification: often referred to as “not putting all your
eggs in one basket”, diversification means to invest in a
variety of dierent markets, products and securities to
spread the risk of loss.
Fiscal policy: the use of government spending and tax policies
to influence macroeconomic conditions such as aggregate
demand, employment, inflation and economic growth.
Investment strategy: the internal guidelines that a fund
follows in investing the money received from its investors.
Inflation: the rise in the general price levels of goods and
services in an economy over a period of time.
Monetary policy: the process by which the authorities of a
country control the supply of money. This often involves
targeting a rate of interest for the purpose of promoting
economic growth and stability.
Quantitative easing (QE): also known as large-scale asset
purchases, a monetary policy whereby a central bank buys
government securities or other financial assets from the
market in order to increase the money supply and encourage
lending and investment.
Strategic asset allocation: a practice of maintaining a mix
of asset classes which should meet an investor’s risk and
return objectives over a long-term horizon and is not intended
to take advantage of short-term market opportunities.
Tactical asset allocation: an active management strategy
that deviates from the long-term strategic asset allocation in
order to capitalise on economic or market conditions that
may oer near-term opportunities.
Tapering: the reduction of the interest rate at which a central
bank accumulates new assets on its balance sheet under a
policy of QE.
Volatility: a term for the fluctuation in the price of financial
instruments over time.
Glossary
HSBC Perspectives Q2 2024 HSBC Perspectives Q2 2024 19
Guest contributors
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