HSBC Sees Melt-up

HSBC is preparing for a “melt-up”. Its multi-asset team argues that concerns over an artificial intelligence mania are overblown, and that equities are more likely to surge into year-end than correct. This view aligns with the idea that much of the market's strength stems from monetary conditions rather than underlying value creation. The bank notes that positioning remains cautious, sentiment is closer to neutral than euphoric, and a large volume of cash is still parked in money market funds—fuel that could drive a final push higher as investors capitulate to fear of missing out.

A melt-up is that uncomfortable late-stage bull market phase when prices rise not on fundamentals like earnings or productivity, but because investors tire of watching others profit. Under-owned markets suddenly become crowded. Benchmarks shoot beyond long-term trends. Every dip gets bought as nobody wants to be the manager—or retail investor—who missed the late rally.

HSBC’s note pushes back on the dominant narrative that we’re already in the midst of an AI-driven bubble. While tech headlines dominate, broader corporate investment remains measured. Much of the recent cash flow has gone into conservative, low-risk vehicles—not just into the hottest corners of the market. In HSBC’s view, investors now fear missing the rally more than they fear a crash.

For Australian investors, that message lands in a market where most super funds are already heavily allocated to equities and property. It’s easy to feel pressure to lean even further into risk. Nobody wants to be the one who held dry powder while global indices surged into Christmas. But historically, bold calls from major banks tend to come in the later chapters of a cycle—not at the beginning.

Meanwhile, as investors debate whether equities have one more leg up, gold has quietly surged. The World Gold Council reports that global demand hit a record in the third quarter, supported by strong investment flows and sustained central bank buying—activity we recently noted may be significantly underreported—even after the metal reached fresh all-time highs in October. Bars, coins and gold-backed funds have all attracted renewed interest, with buyers seeking shelter from geopolitical tensions, tariff risks, and growing doubts over the sustainability of today’s policy-debt mix.

This trend has reshaped the global reserve landscape. According to the European Central Bank, gold now comprises around 20% of official reserves—more than the euro’s 16%, and second only to the US dollar. The metal long dismissed as a relic has quietly reasserted itself as a pillar of the reserve system. That’s not what we’d expect if policymakers were fully confident in the outlook for sovereign debt, sanctions exposure, or the long-term value of fiat currencies.

Viewed together, HSBC’s equity melt-up thesis and the persistent accumulation of bullion by central banks tell a consistent story: liquidity remains abundant. If shares do surge into year-end, it may well be another symptom of the same forces that have lifted gold to new highs and kept official buyers firmly in the market.