HSBC Private Bank reiterated its positive stance towards equity markets for 2010, although it says caution is necessary as a pullback to the market is possible with periods of volatility ahead.

The bank said the focus of its equity market stance is on the US, but says there are also opportunities to make money in Asia Pacific ex-Japan stocks and it also has a growing appetite for emerging market equities. Sectorwise, it has a preference towards cyclical stocks rather than defensives.

The private bank is neutral on fixed income as an overall asset class, preferring short to medium-duration exposure in government debt issued by the US, UK and euro zone. It is more positive in emerging market local currency debt due to the downward trend of interest rates and inflation. It is also bullish on select corporate investment grade credit.

HSBC said it is also bullish on hedge funds and expects the strong rebound of 2009 in terms of performance to run on in 2010. On foreign exchange, the US dollar is expected to be supported by interest rate differentials, because euro zone interest rate and bond yield rises will be more muted than across the Atlantic.