Sonders: “High Flyer” Correction Won’t Take Market Down

While the recent market turmoil has led some to predict that a new a bear market is coming, top strategist Liz Ann Sonders of Charles Schwab thinks otherwise. “We have more of an internal correction among high-flying stocks,” Sonders tells Bloomberg TV. “There are some high flyers within small segments of the market but it is neither infecting the market from a valuation perspective nor likely to bring the entire thing down.” Sonders says too many comparisons are being made to the 2000 era, when valuations were exponentially higher than they are now.

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Sonders: Conditions Aligning For Capex Turnaround

US  companies are sitting on record amounts of cash, and when they’ve put cash to work over the past few years they’ve tended to do so through buybacks and dividends — not capital expenditures. But Charles Schwab’s Liz Ann Sonders says the tide may be turning.

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Sonders On Weather, Inflation, And The Fed

Charles Schwab Chief Investment Strategist Liz Ann Sonders says she thinks the market’s recent turnaround has more to do with a belief that weather has been behind some weak economic data than it does with a belief that a weaker economy will lead the Federal Reserve to slow its plan to taper its asset purchases. “There is a lot of indication that [the weak data] has been very dependent on the weather, but I also think we’re well past the point where the market is going to rally on negative news,” Sonders tells Yahoo! Finance’s Daily Ticker. Continue reading

Sonders: “Everybody Is Looking For That Next Crisis”

Charles Schwab’s Liz Ann Sonders says that the specter of the 2008 financial crisis and market crash is still haunting many investors — and that’s a good thing. “I think it’s the muscle memory of the financial crisis,”  Sonders tells Bloomberg Surveillance in discussing how investors are today reacting differently to market declines than they have in the past. Continue reading

Sonders on an EM Contagion

Charles Schwab’s Liz Ann Sonders thinks we are likely to see more short term weakness in the stock market, but she doesn’t think emerging market troubles will upend the broader bull market.

“Although I think the stock market’s pullback could eventually become an actual correction, I also believe the secular bull market that began nearly five years ago is not dead … just taking a breather,” Sonders writes in commentary on Schwab’s website. “There are financial market and economic connections between the developing and developed markets, but short-term EM currency crises are unlikely to have a lasting impact on our market.”

Sonders says eventual positives will come from the U.S. ending its quantitative easing program (which seems to be driving the EM troubles), “not least being a stronger dollar and lower commodity prices. Both are beneficial to a consumption-oriented economy like the United States’.” Trade shouldn’t be impacted too much by the end of QE, she adds. US exports to the top five nations within the MSCI emerging markets index — China, South Korea, Taiwan, Brazil and South Africa — “represent only 2% of US gross domestic product,” she notes.

Still, Sonders says some continued short term market weakness is likely, though she doesn’t think it will be enough to derail the bill market. “Barclay’s has pointed out that the response by US equities to inflection points in monetary policy over the past 30 years have been quite homogeneous; even with different approached to policy,” she says. “Equity market pullbacks were tightly dispersed between 7.5% and 9% over two-to-three months, followed by a recovery and a couple of quarters of range-bound trading before the uptrend resumed. This seems like a good roadmap to consider for the next few months.” 

Sonders: No Time To Bail On Stocks

While the market may well hit some road bumps this year, top strategist Liz Ann Sonders of Charles Schwab says it’s no time to ditch stocks.

“There is a slightly elevated risk of a 10% correction this year, but I don’t think the secular bull market is over,” Sonders said at the recent Inside ETFs conference, Investment News reports. “I have some short-term concerns, but I personally think the bull market we’re in now will be the best is our lifetime.”

Valuations may be around historic median levels based on forward earnings, but Sonders says that’s not cause for concern. “Bull markets rarely stop at the median P/E,” she said, noting that the average trailing P/E of every bull market since the 1950s is 18.7; currently it is 16.6.

Sonders points to extremely high levels of corporate cash, which she thinks companies will finally start to use to make capital expenditures this year, as one reason for her bullishness. Another: the strong state of US manufacturing.

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Sonders: December Jobs Numbers Look Like A Fluke

Charles Schwab Chief Investment Strategist Liz Ann Sonders says the market does have a couple strikes against it right now, but they are likely short term issues, she contends. Sonders says sentiment conditions have been stretched a bit, and she says the second year of the presidential cycle often features a significant correction. But she says those corrections often mark good buying opportunities. Sonders also thinks the weak December jobs numbers were a fluke and in part a result of seasonal factors.


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Sonders Talks Bulls, Rising Rates, Valuation, and More

Charles Schwab Chief Investment Strategist Liz Ann Sonders remains optimistic on stocks, saying that she thinks the bull run that began in 2009 is a secular bull, not a cyclical bull within a larger bear market.

While no one knows how long the bull will run, Sonders says secular bulls tend to last longer than cyclical ones. “I try to make sure people understand that doesn’t mean the market goes straight up and never looks back,” Sonders tells The Wall Street Journal. “You can have some brutal declines within a secular bull market. But I think we’re more likely in that than just a cyclical pop here.”

And Sonders doesn’t think a rising interest rate environment means big trouble for stocks. “I think you have to differentiate rising rates between the long end and the short end,” Sonders says. “You have a honeymoon phase in the early stages of tightening, assuming inflation stays in check. When you get to the point where short-term rates start to go up, the first stage of that — and it varies from cycle to cycle — doesn’t tend to be bad for the stock market.” When rising rates become a problem, she says, is “only when the rise in rates starts to bite and/or the Fed has to continue to raise rates — not because of re-acceleration in the economy but because inflation is starting to take hold.”

Sonders also talks about what to make of recent housing data, current market valuations, and why hedge funds have been struggling.

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Sonders: Long Term Prognosis Still Bullish

Though some have grown concerned that the stock market is overheated, top strategist Liz Ann Sonders of Charles Schwab thinks the long term picture remains good.

“The growing cries that we’ve reached sentiment or valuation extreme worthy of past tops, or a bubble at its bursting point, seems a bit premature; even with the Dow hitting 16,000 and the S&P 500 hitting 1800,” Sonders writes on She looks at nine different indicators of market tops, each of which was in effect when the last two bull markets peaked. Today, only one of the nine is flashing a warning signal — rising real interest rates. And Sonders offers some reasons why that may not even be much of a warning.

Sonders also talks about why recent pickups to stock fund flows aren’t a big concern, and why valuations show that stocks should have more room to run. She does say that short term frothiness could lead to a correction, especially if the Federal Reserve starts tapering, but she sees that as being short term. And, while she thinks we’re in the middle of a secular bull, Sonders would welcome a short term pullback. “My bottom line is that I continue to hope for a pullback here in the near-term to alleviate some of the frothiness that’s crept in and keep the bull market going,” she says. “But I continue to fear a melt-up. Why ‘fear’? As good as they feel while they’re happening, they don’t end well.”

Sonders Still Bullish, But Wouldn’t Mind a Pullback

Charles Schwab Chief Investment Strategist Liz Ann Sonders thinks we are still in the middle of a secular bull market that began in 2009. Sonders tells FOX  Business Network that in the very short-term, sentiment levels may be a bit stretched, but overall valuations are reasonable and the market looks pretty good. Sonders says she would actually be glad to see a bit of a pullback in the short term to shake out some optimistic sentiment, however, noting that that is often what is needed for the market to move even higher. Heading into 2014, she’s high on industrials, tech stocks, and consumer discretionary plays, along with other cyclical areas of the market. She thinks the commodities supercycle has ended, however, which has her much less keen on basic materials stocks. She also is not enamored with utilities and consumer staples, noting that the most recent leg of the stock market’s rally has been led by more defensive type names. Sonders also talks about how correlations have fallen across the world, making diversification an important piece of strategy for investors

For more on Sonders’ take on the markets, you can also check out a recent piece she wrote for Barron’s.

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