Key takeaways

• While some investors have been worrying about the sharp rally in AI and tech stocks, the US announcement of an additional 100% tariff on Chinese goods and export controls on ‘any and all critical software’ from 1 November provided a good excuse for profit taking. The political uncertainty could extend the volatility in the coming weeks.
• We think the surprise effect is now much less than around Liberation Day – the market impact should therefore also be less pronounced (implied volatility is less than half the April level). Markets should be further supported by the US Q3 earnings season, where we expect to see positive surprises, and by the October Fed rate cut.
• In the short term, volatility needs to be managed and our overweight positions on gold and investment grade bonds should continue to benefit. Given our confidence in US economic growth, earnings expansion, AI innovation and Fed cuts, we remain overweight on US equities and would take any pronounced tactical market pullback as a longer-term buying opportunity.

Please refer to the full report for details about the event and our investment view.

https://www.hsbc.com.my/wealth/insights/market-outlook/special-coverage/what-is-causing-the-current-market-volatility-and-how-far-can-it-go/