Rachel Reeves' financial cushion increases twofold in leaked budget document
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Nov 26 2025
0mins
Should l Buy HSBC?
Source: SeekingAlpha
Chancellor's Fiscal Boost: A leak from the Office for Budget Responsibility revealed that Chancellor Rachel Reeves increased the U.K.'s fiscal buffer to £22B from £9.9B, marking the highest level since March 2022, alongside a projected £29.8B rise in taxes.
Market Reactions: Following the leak, U.K. financial stocks saw gains in U.S. morning trading, with Barclays, HSBC, Lloyds, and NatWest all experiencing increases, contributing to a 0.8% rise in the FTSE 100 Index.
New Tax Measures: The leaked document proposed an additional tax on homes valued over £2M, a two-percentage-point increase in property and savings income taxes, and changes to pension contributions that will affect National Insurance Contributions starting in 2028.
Economic Forecast Adjustments: The OBR indicated that inflation is expected to be about half a percentage point higher than previously forecasted, while nominal GDP growth projections are only slightly lower than earlier estimates.
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Analyst Views on HSBC
About HSBC
HSBC Holdings plc (HSBC) is a banking and financial services company. Its business segments include Hong Kong, UK, Corporate and Institutional Banking (CIB), and International Wealth and Premier Banking (IWPB). Its Hong Kong business comprises retail banking and wealth and commercial banking of HSBC Hong Kong and Hang Seng Bank. Its UK business comprises UK retail banking and wealth (including first direct and M&S Bank) and UK commercial banking, including HSBC Innovation Bank. The CIB segment is formed from the integration of its commercial banking business (outside the UK and Hong Kong) with its global banking and markets business. The IWPB segment comprises premier banking outside of Hong Kong and the UK, its global private bank, and its asset management, insurance and investment distribution businesses. Its customers worldwide through a network covering 58 countries and territories. Its customers range from individual savers and investors to companies, governments and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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See More
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- Optimistic European Outlook: Goldman Sachs projects a 7.5% annual return for European stocks over the next decade, driven by strong earnings growth and a dividend yield of about 3%, which is likely to attract more investor interest in the European market.
- Emerging Market Potential: Emerging market stocks are expected to return 12.8% annually, primarily supported by robust earnings growth in China and India, highlighting the significance and appeal of these markets in the global economy.
- Vanguard ETF Advantages: The Vanguard FTSE Europe ETF boasts an expense ratio of just 0.06%, significantly lower than the average 0.81% for similar funds, providing investors with a cost-effective avenue for European stock exposure, thereby enhancing its market competitiveness.
- US vs. European Stocks: While US stocks outperformed European stocks over the past decade, Goldman believes that due to high valuations in the US market, European stocks may surpass them in the next decade, prompting investors to reassess their asset allocation strategies.
See More
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- Economic Slowdown: The U.S. added only 181,000 jobs in 2025, a sharp decline from 1.2 million in 2024, indicating weak economic growth that may put additional downward pressure on the S&P 500.
- Optimistic Market Expectations: Despite the economic slowdown, Wall Street analysts predict a roughly 10% increase in the S&P 500 for 2026, primarily driven by economic growth supported by tax cuts and artificial intelligence spending.
- Significant Valuation Risks: The S&P 500 currently trades at a forward P/E ratio of 22, well above the 10-year average of 18.8, having only maintained such high valuations during the dot-com bubble and the pandemic, suggesting potential bear market risks ahead.
- Midterm Election Impact: Historical data shows that since 1950, the S&P 500 has averaged only a 4.6% return in midterm election years, with an average intra-year drawdown of 17%, increasing uncertainty for the market in 2026.
See More
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- Systemic Risk Warning: Major European banks have warned that the UK's proposal to loosen capital requirements for electronic trading firms like Jane Street and Citadel Securities could heighten the risk of a systemic crisis, as their failures are perceived to not impact depositors, thus considered lower risk.
- Industry Opposition: The Association for Financial Markets in Europe argues that a blanket reduction in capital requirements fails to reflect the systemic risks posed by large investment firms, emphasizing that market risk standards should be calibrated to a firm's activities and systemic footprint rather than its legal form or the presence of retail deposits.
- Policy Advocacy: UK Chancellor Rachel Reeves is urging financial regulators to implement policies that foster growth, indicating government support for financial market reforms that could influence future regulatory directions.
- Regulatory Options Discussion: The Financial Conduct Authority is considering seven options, including replacing the current European approach with a net capital rule similar to that used in the U.S., which may streamline requirements for firms that prefer to utilize their internal risk models, reflecting a focus on market adaptability.
See More
UK Treasury Selects HSBC Blockchain for Digital Gilt Pilot
- Blockchain Platform Selection: The UK Treasury has chosen HSBC Holdings' blockchain platform for the pilot issuance of digital gilts, marking a significant step in updating the UK capital markets infrastructure and expected to enhance market efficiency.
- Bond Issuance Innovation: By issuing bonds on the blockchain, HSBC claims it will significantly reduce settlement times, thereby improving the structural efficiency of the UK's debt capital markets and enhancing market liquidity.
- Regulatory Sandbox Testing: The Treasury plans to issue the digital bonds within a regulatory sandbox overseen by the UK Financial Conduct Authority, aiming to assess technical and legal risks in preparation for future market rollout.
- Market Impact Expectations: HSBC Holdings' market capitalization has surpassed $300 billion for the first time, reflecting its leading position in European banking and providing new growth opportunities for digital transformation.
See More
Investors Shift Focus to International Equity ETFs Amid U.S. Market Concerns
- Market Overvaluation Risk: The S&P 500 is currently trading at around 30 times earnings, indicating a historically high valuation that may weaken investor confidence in U.S. stocks, thereby driving capital towards overseas markets.
- Tech Stock Dominance Issue: The gains in the U.S. market have been primarily driven by a handful of mega-cap tech stocks like Nvidia, Microsoft, and Apple, and if these stocks falter, it could trigger a broader market decline, prompting investors to seek more diversified investment options.
- International ETF Appeal: The Schwab International Equity ETF (SCHF) tracks the FTSE Developed Markets Index and holds 1,498 stocks, primarily from markets like Japan, the U.K., and Canada, providing instant diversification for investors looking to mitigate U.S. market risks.
- Low Fee Advantage: With an expense ratio of just 0.03% and a more than 40% increase over the past five years, SCHF also offers a 3.4% distribution yield, making it attractive for income-seeking investors, showcasing its investment value in a declining interest rate environment.
See More
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- Impact of Rating Upgrade: HSBC's upgrade may attract more investor attention to Align Technology, enhancing its market liquidity and stock price stability, thereby strengthening the company's competitive position in the medical device sector.
- Positive Market Reaction: Investors responded positively to HSBC's rating adjustment, indicating increased market confidence in Align Technology, which could facilitate more capital inflow and further drive stock price appreciation.
- Strategic Implications: This rating upgrade not only enhances Align Technology's market image but may also provide funding support for future business expansion and product innovation, helping the company capture a larger share of the rapidly growing digital dentistry market.
See More
