Willem Sels argues that current valuation models fail to account for the structural productivity gains from AI adoption. He believes that companies integrating AI will see higher earnings, which makes US stocks appear cheaper than their headline valuations suggest.
Sels highlights a disparity in forward P/E ratios: the S&P 500 is at roughly 19 times earnings, while the Stoxx 600 in Europe is nearly 15 times. He notes that the premium for US stocks has compressed from previous highs, where the S&P 500's forward P/E once exceeded 22 times.
The HSBC executive sees the most significant upside in technology and semiconductor stocks, specifically mentioning that skepticism regarding chipmakers' 2027 earnings forecasts may be misguided. HSBC's current investment strategy favors US and Asian equities over European markets.
Sels identifies the 10-year Treasury yield, currently hovering near 5%, as a primary risk factor. He suggests that high yields could trigger significant volatility in equity markets as the bond market competes for capital.