More by the Same Author
2013-05-16 Everybody Wants Some: Central Banks and Bond Funds Step up Buying of Stocks by Liz Ann Sonders of Charles Schwab
The stock market has broken out of its "triple top" formation, which started in 2000, yet remains reasonably valued. Supply within the stock market has been dwindling thanks to near-record company buybacks. Demand for stocks is coming from some seemingly unlikely sources: global central banks and bond mutual funds.
2013-05-02 Disconnect: Why Stocks and Economy Often Move in Opposite Directions by Liz Ann Sonders of Charles Schwab
The stock market hit all-time highs during the first quarter, yet the economy again underperformed expectations. Is the disconnect an aberration or the norm?
2013-04-05 Eye of the Beholder: Dissecting the Variety of Price-Earnings Ratios by Liz Ann Sonders of Charles Schwab
There are many ways to value the stock market. Here, a look at several popular metrics, along with my view on the attractiveness of stocks.
2013-03-04 Living in the Past: Investors Finally Putting Away the Rear-View Mirror? by Liz Ann Sonders of Charles Schwab
With a very strong January in the books for stocks, and hefty inflows into stock mutual funds, are we finally seeing the investor class become believers?
2013-03-04 Reminiscences of Marty Zweig: What I Learned From a Market Great by Liz Ann Sonders of Charles Schwab
Wall Street loses one of its greats. Remembering Marty's contributions to my career... and investors everywhere. Marty epitomized humility and civilityboth in short order today.
2013-01-17 Rehab: An Update on Housing Recovery by Liz Ann Sonders of Charles Schwab
The National Association of Home Builders' Housing Market Index has staged a record-breaking run higher. Home prices have been rising and are feeding into real mortgage rates, consumer confidence, household net worth...and pushing fence-sitters off the fence. Housing's contribution to job growth could push the unemployment rate down more quickly than many believe.
2013-01-03 Taking Care of Business, DC-Style, to Avert the Fiscal Cliff by Liz Ann Sonders of Charles Schwab
No "grand bargain," but Congress got a deal done at the 13th hour to avert the fiscal cliff. The next two months will bring more DC wrangling and likely market angst, but we believe the outlook has brightened for the economy and market in 2013. The "wall of worry" is alive and well.
2012-12-19 Imagine...a Better Future by Liz Ann Sonders of Charles Schwab
After a weekend of sadness and reflection, I wanted to write something more optimistic we'll go back to the future to learn and unlearn.
2012-12-13 Conditional: Fed Drops 2015 in Favor of 6.5% and 2.5%185 by Liz Ann Sonders of Charles Schwab
The Fed announced it's adding $45 billion in US Treasury purchases to QE3s $40 billion in MBS purchases and moving to economic versus calendar targets.
2012-12-05 Market at Mercy of Fiscal Cliff Until Resolution by Liz Ann Sonders of Charles Schwab
Politics and the fiscal cliff are dominating market action and adding to the uncertainty factor.
Sentiment is better, technicals are mixed and valuation is reasonable, but until we get past the cliff, fundamentals won't matter a lot.
There are some coiled springs forming that could help offset any fiscal-cliff related contraction next year.
2012-11-14 Helplessly Hoping...That a Market Riot Isn't Needed for Fiscal Cliff Fix by Liz Ann Sonders of Charles Schwab
A status-quo election puts the "fiscal cliff" front and center. The stock market's knee-jerk reaction was to sell; could further weakness light a fire under politicians? Good news has come from recent economic numbers, but sentiment will remain under pressure until the fiscal cliff is resolved.
2012-11-12 Fiscal Cliff, US Economy and Election Results - What Happens Next? by Liz Ann Sonders of Charles Schwab
Housing, manufacturing, and post-Sandy rebuilding could help offset the drag from the fast-approaching "fiscal cliff," but for now, uncertainty is front and center.
2012-11-09 Fiscal Cliff, US Economy and Election ResultsWhat Happens Next? by Liz Ann Sonders of Charles Schwab
Even if the United States falls off the "fiscal cliff," the hit to the economy will probably be gradual. And while the fiscal cliff probably figured into the recent market pullback, it's not the only contributor. Resolution to this issue, the continuation of positive trends in housing and manufacturing, and fundamental tax reform could help give the economy a boost.
2012-10-31 Switch: Business Confidence Sinks While Consumer Confidence Lifts by Liz Ann Sonders of Charles Schwab
A wide gap has developed between sagging business confidence and improving consumer confidence...and the election and fiscal cliff appear to be the culprits.
2012-10-26 No New News From the Fed by Liz Ann Sonders of Charles Schwab
Given that it's just two weeks before the presidential election and that the Federal Reserve made several key announcements after its last meeting in mid-September, we weren't expecting any fireworks from today's Federal Open Markets Committee (FOMC) meeting.
2012-10-17 Rise Up: US Soft Patch Appears to be Ending by Liz Ann Sonders of Charles Schwab
By definition, inflection points are characterized by maximum weakness. Many US economic readings are again suggesting notable signs of life. Will the improvement be enough to offset the "fiscal cliff"?
2012-10-03 Don't Bring Me Down: Not Swayed by Pessimism at BCA Conference by Liz Ann Sonders of Charles Schwab
We present highlights, key takeaways and perspective on the recent BCA Research Investment Conference. The eurozone crisis and China's slowdown remain risks, but are somewhat offset by optimism about US markets. Politics will remain a force underpinning uncertainty and volatility.
2012-09-19 Us and Them: Household Sector Deleveraging vs. Public Sector Leveraging by Liz Ann Sonders of Charles Schwab
The eruption of the financial crisis in 2008 unleashed a household deleveraging cycle, triggering unprecedented Fed easing and now QE∞. Next up, government sector deleveraging.
2012-09-05 Profit Motive: If Earnings/Margins Are Peaking, What About Stocks? by Liz Ann Sonders of Charles Schwab
Earnings growth has peaked, but don't necessarily assume the same about margins. Present pace of earnings growth has historically been accompanied by decent market performance. Margins are increasingly driven by domestic and foreign earnings, but peaking margins have historically been accompanied by strong market performance.
2012-08-21 Young Americans: The Death of Equities May be Exaggerated by Liz Ann Sonders of Charles Schwab
PIMCO founder Bill Gross believes the "cult of equity is dying" let me take the other side. Mutual-fund flows suggest that we may have lost a generation of investors. However, demographics suggest there may be another generation that could be the stock market's savior.
2012-08-01 Housing: Good Vibrations by Liz Ann Sonders of Charles Schwab
It's time for an update to January's report on housing, and the news continues to get better. Household formations are key. Household formations are moving higher but housing completions aren't keeping pace. Real mortgage rates plunge into negative territory. Key housing market index indicates continued sales (and pricing) recovery.
2012-07-03 Jump: Market Rallies Sharply on EU Summit News by Liz Ann Sonders of Charles Schwab
Friday's sharp rally on better European news is followed by weaker economic news this week, keeping debate alive about what the market's priced in. When markets expect nothing and get something it can be a recipe for a rally. Investors of every ilk have de-risked, unleashing a scramble last Friday. The US economy is at stall speed, but still looks better than much of the world.
2012-06-19 Achilles Last Stand: Greeks Vote in Favor of Euro by Liz Ann Sonders of Charles Schwab
The June 17 Greek elections favored the pro-bailout party and allow for a likely coalition to be formed probably the least-tumultuous outcome. However, kicking the can further down the road doesn't solve the eurozone's structural problems, nor does it stem contagion. Next on investors' radar is this week's Federal Reserve meeting, where additional easing is expected.
2012-06-06 Our House: Is the United States the Best House in a Bad Neighborhood? by Liz Ann Sonders of Charles Schwab
I won't try to put lipstick on the pig that was last Friday's May jobs report, but I will try a little lip gloss. Somewhat lost in the mire of the dire reaction to the report were several other more-positive readings on the economy. That's testament to the likelihood that there are many more drivers to today's malaise than just jobs growth, or lack thereof. It seems clear we're in the midst of the third consecutive mid-year economic slowdown, driven by similar forces, most dominantly the eurozone debt crisis.
2012-05-15 Month of May: Sell and Go Away, or Hang in There? by Liz Ann Sonders of Charles Schwab
We believe the stock market's correction is likely to be less severe this year relative to 2010 or 2011.
Be aware of the possible perils of following a "sell in May" trading strategy.
For now, macro concernsincluding Europe and the looming "fiscal cliff"are trumping better micro news.
2012-04-26 One Step Closer: Fed Keeps Rates Low But Gets More Hawkish by Liz Ann Sonders of Charles Schwab
The Federal Reserve's Open Market Committee (FOMC) made no change to short-term interest rates, but provided no hints that a third round of quantitative easing (QE3) was in the offing. As usual, the committee repeated its comment about keeping the Fed's balance sheet under review and being willing to act "as appropriate," while also confirming its pledge to keep rates "exceptionally low" through 2014. For the third consecutive meeting, there was one dissenterRichmond Federal Reserve Bank President Jeffrey Lackerwho believes the first increase in rates will be necessary in 2013.
2012-04-03 Comfortably Numb: Have Investors Become Too Complacent? by Liz Ann Sonders of Charles Schwab
The market has had its best first-quarter start in 14 years!
But with the rally has come elevated optimism, a contrarian indicator.
The market may be vulnerable in the short term, but we think optimism longer-term remains warranted.
Let's get right to the point: It was the best first quarter for the stock market since 1998. The total return of the S&P 500 index was 12.6% for the quarter; up nearly 30% from the October 3, 2011 low. What was particularly notable about the surge since then has been the attendant plunge in volatility.
2012-03-14 No QE3 Yippee! by Liz Ann Sonders of Charles Schwab
The Fed made no major changes to its policy statement and announced a continuation of Operation Twist, but did not hint at or announce further quantitative easing.
The Fed's assessment of the economy did improve somewhat.
Richmond Fed President Lacker's dissent and Dallas Fed President Fisher's pronouncements ring true.
2012-02-28 Black: Swans and Crude by Liz Ann Sonders of Charles Schwab
Economic/financial "black swans" are generally more dire than geopolitical ones.
The Middle East is today's hotbed for potential geopolitical crises.
Oil is taking the brunt of the pressure, but it's not necessarily the death knell for stocks or the economic recovery.
2012-01-31 Sunday Bloody Sunday: Hoping For a Giants Win by Liz Ann Sonders of Charles Schwab
The "January effect" stock-market indicator bodes well for the rest of year.
A "golden cross" occurrence would also add fuel to the market bulls' fire.
Sentiment looks frothy in the near term, but the "wall of worry" remains intact.
I think the market is vulnerable to a pull-back in the near term, but likely remains in a bull market, with further gains to come. It's also worth noting that February has not been a great month for the stock market historically. But, if the Giants win on Sunday, my mood will improve.
2012-01-26 Journey to the Center of the (Fed's) Mind by Liz Ann Sonders of Charles Schwab
The Federal Reserve opted to keep short-term interest rates on the floor and extended the period of time during which rates are likely to remain near zero.
Newly published forecasts show slightly better growth, a bit less inflation and a lower unemployment rate.
Fed Chairman Ben Bernanke got hit with a lot of questions about the risks of extending zero-rate policy for 2 more years.
2012-01-18 Rock Bottom: Housing May Have Already Hit It by Liz Ann Sonders of Charles Schwab
A comprehensive (read: long) and chart-filled update on housing suggests the bottom may largely be in. Pricing may have more downside and real mortgage rates need to decline further, but most other metrics are flashing green. New themes: housing becoming "local" again, and for now, renting is trumping buying.
2012-01-05 True Reflections on 2011 and 2012 by Liz Ann Sonders of Charles Schwab
The Dow Jones Industrial Average (DJIA) managed a gain for the year in 2011, but very few investors were cheering.
With inflation settling down, the upward boost to real gross domestic product (GDP) is likely being underestimated.
Although the eurozone crisis may keep volatility elevated short-term, 2012 is looking like a better year.
2011-12-14 Fed Ends 2011 with a Whimper by Liz Ann Sonders of Charles Schwab
There were no surprises out of the Fed meeting today, with short-term interest rates remaining pegged at zero. There was one dissenting FOMC member who wished for additional policy accommodation. Much of the Fed's near-term focus remains on the eurozone debt crisis.
2011-11-29 Deja Vu? Eurozone Crisis Today vs. 2008 Subprime Crisis by Liz Ann Sonders of Charles Schwab
News flow on the eurozone debt crisis is speedy, and the latest news of a fiscal pact brings cheers by stock investors for now.
There are many similarities between the 2011 and 2008 crisesbut even more differences.
The end of the "Debt Supercycle" has ushered in a period of heightened risk and shortened economic/market cycles.
2011-11-15 Every Picture Tells a Story: Market Charts Looking Good by Liz Ann Sonders of Charles Schwab
With so much focus on the macro, I thought an update on the micro would be welcome.
Several measures of sentiment, valuation and technical conditions show the market to be in pretty good shape.
Macro headwinds persist, but the expectations bar has arguably been set low enough to be easily hurdled.
2011-11-02 Born in the USA: A Look at What Could Go Right by Liz Ann Sonders of Charles Schwab
The expectations bar has probably been set low enough to be easily hurdled as the big market rally may be indicating.
Not only is recession risk fading in the near term, a very positive longer-term story is emerging, even though very few are in tune (yet).
Investors have gotten used to digesting worst-case scenarios maybe it's time to ask what could go right.
2011-10-19 Welcome to the Machine: High-Frequency Trading Domination by Liz Ann Sonders of Charles Schwab
Market volatility has spiked, starting with 2010's flash crash and culminating in this year's wild August, bringing asset-class correlations up with it.
High-frequency trading and the use of leveraged exchange-traded funds (ETFs) are the primary culprits, but the impact isn't all bad.
What are regulators doing and saying about the phenomenon?
2011-10-05 Million Dollar Question: Dollar and Recession Risk Up Together by Liz Ann Sonders of Charles Schwab
Recession fears have mounted, but the picture is still mixed and it's not yet conclusive.
The US dollar is winning the "least ugly" currency contest, but isn't helping stocks or commodities.
Short-term, a stronger dollar is a negative for riskier assets but not necessarily longer-term, if history's a guide.
2011-09-22 Twist and Shout: The Fed, as Expected, Announced "Operation Twist" by Liz Ann Sonders of Charles Schwab
The Federal Reserve announced "Operation Twist," which was largely expected.
The goal is to further reduce borrowing costs and push money via lending out into the real economy.
Whether it will work is the big question because high interest rates are not the economy's problem.
Ultimately, confidence has to improve before we're likely to enjoy any reasonable pace of economic growth. Whether this move by the Fed starts the confidence-healing process remains to be seen. But we suggest you keep your expectations relatively low.
2011-08-31 1/2 Full: Not Throwing in Towel on Recession Probability by Liz Ann Sonders of Charles Schwab
Double-dip recession chatter is highly elevated, but I think we'll scrape by without one. Leading indexes are giving conflicting signals. Recession or not, growth will be weighed down by debt and lack of confidence. Let me state right up front that even though I'm not in the recession camp, risks that there will be one have risen markedly. A good deal of that risk relates to the breakdown in confidence triggered by the debt ceiling-related political antics, the subsequent downgrade of US debt by Standard & Poor's, the ongoing debt crisis in the eurozone and a highly volatile stock market.
2011-08-15 Panic Is Not a Strategy - Nor Is Greed by Liz Ann Sonders of Charles Schwab
Originally published in 2008, it's time for a refresher about the perils of panic.
Asset allocation, diversification and rebalancing are as close to a "free lunch" as you can get as an investor.
ThIn world where time horizons have shrunk precipitously, think longer-term.
2011-08-15 Return to Recession.or Recovery? by Liz Ann Sonders of Charles Schwab
Soft economic data has caused talk of a return to recession to grow, leading to a return to the risk-off trade and a spike in volatility. We believe these fears and the market reaction are overdone and indicators still point to growth, but risks are high. The chorus calling for a new quantitative easing (QE3) program from the Fed has grown. We believe it's unlikely at this point. The European debt crisis continues to damage investor confidence as policymakers appear to be consistently behind the curve. Meanwhile, the economic slowdown could ultimately help emerging markets.
2011-08-03 Disappearing Act: GDP Loses Steam by Liz Ann Sonders of Charles Schwab
Although the debt deal remains top-of-mind, the latest GDP report's weakness didn't ease the angst.
The economy is now operating at "stall speed" and is at a crucial inflection point.
There's not much good news other than corporate profits, which have boomed.
2011-08-03 Let's Make a (Debt) Deal and Crush the Market by Liz Ann Sonders of Charles Schwab
Today was about fundamentals, both here and in Europe. We got yet another batch of limp economic news today with weak personal income and spending; while we're still hung over from last week's hit to GDP growth for the first half of this year, and all of the recession's era. As a refresher, GDP barely grew at 0.4% in the first quarter and grew a paltry 1.3% in the second quarter. It didn't help that the S&P 500 crossed below its 200-day moving average, which often begets additional selling by the technically-inclined traders.
2011-07-19 Staring at the Ceiling by Liz Ann Sonders of Charles Schwab
Everyone's focused on the debt-ceiling negotiations, impacting everything from market action to consumer confidence.
Default remains unlikely, but investors are wondering about portfolio positioning in the event the unthinkable occurs.
Behind the scenes, the news isn't all bad, as some economic readings and most corporate earnings releases have been pleasant surprises.
2011-07-06 Sparks: Are Stocks Telling a Better Story For the Second Half? by Liz Ann Sonders of Charles Schwab
Investors continue to focus on the macro … but the micro is telling a much better story.
There was lots of good micro and macro news last week.
Is the market's rally sending a signal that the second half of the year is looking up?
2011-06-14 Heartbreaker: Soft Patch Hits Stock Market by Liz Ann Sonders of Charles Schwab
We remain in the soft patch versus double-dip recession camp, believing a lot of the weaker growth has been from temporary factors.
Investor sentiment has become decidedly pessimistic… a contrarian positive for stocks.
Market breadth also shows the market at extremes typically followed by a bounce.
2011-06-02 Some Days (Months) Are Better Than Others by Liz Ann Sonders of Charles Schwab
May was a rough month for investors, though it ended on a sunnier note. A growth slowdown is evident, but the debate rages about whether its factors are temporary. We think May's risk-off mode is easing, but choppy action remains likely until longer-term worries subside. After an uphill ride in April, when the Dow was up 4%, May wasn't kind to investors, although the last two trading days brought some sunshine. It was the first time in nearly three years that the S&P 500® index had no up weeks in a month.
2011-05-17 Breakdown: Commodities Tumble … For Good? by Liz Ann Sonders of Charles Schwab
'When in doubt, get out' has become the mantra for commodities traders the past couple of weeks. Sentiment had become too one-sided (and may need to ease even further). Is risk-on, risk-off trading finally coming to an end, and can fundamental analysis prevail? We've written a lot about the 'risk-on, risk-off' trading environment prevalent over the past several years. Risk on is basically when investors have been feeling better about the global economy and about the markets, so they buy and embrace more risky assets. Then, when fears rise investors essentially avoid all risk—risk off.
2011-04-28 The Fed Meets the Press by Liz Ann Sonders of Charles Schwab
The Fed's meeting ended with no surprises on rates or outlook.
But the first-ever news conference added some clarity, context and transparency to the Fed's thinking.
The Fed has just begun its long process toward monetary policy normalization—and that's a good thing.
2011-04-05 When Doves Cry: Debates Rage About QE2's Finale by Liz Ann Sonders of Charles Schwab
Will the Federal Reserve's quantitative easing (QE2) pull into the dry dock in June as intended? If so, what are the implications for stock and bond investors? Might the Fed begin tightening policy before many think?
2011-02-28 Moment of Surrender: Regimes Fall, Oil Prices Spike by Liz Ann Sonders of Charles Schwab
Geopolitical tensions swell along with oil prices, pushing the stock market lower. The absence of a longer-term oil- supply shock suggests the price spike could be short-lived. Consumers will take a hit, but the broader economy should avoid a double-dip recession.
2011-02-15 Food Chain: Do Spiking Food Prices Warn of Generalized Inflation? by Liz Ann Sonders of Charles Schwab
Food inflation has heated up and has incited global unrest. But for now, it's unlikely to become a monetary phenomenon. Investors should expect geopolitical risk to stay elevated in 2011, with implications for emerging markets performance.
2011-02-01 Back in Black: Economy Moves to Expansion From Recovery by Liz Ann Sonders of Charles Schwab
Real GDP moves from recovery to expansion, but growth remains below potential. Inflation concerns globally replacing double-dip recession concerns as key theme in 2011. Egyptian unrest and rising volatility could further temper optimism, which could bring back the "wall of worry" the stock market likes to climb.
2011-01-28 The Fed Sticks to the Status Quo by Liz Ann Sonders of Charles Schwab
The Fed announced no changes to its interest rate and quantitative easing round two (QE2) policies. There were no dissenters, with two new voting members changing their tune about QE2. The risk is growing that the Fed will stay easy too long, which could have implications for bond yields (and bond investors).
2011-01-19 House of the Rising Sun: A Check-Up on Housing by Liz Ann Sonders of Charles Schwab
Housing is becoming less national and more regional in terms of strength/weakness. Affordability is up but so are foreclosures. Employment remains key to housing, but be aware of housing's diminished impact on the economy.
2011-01-04 Glory Days: Another Good Year in 2011? by Liz Ann Sonders of Charles Schwab
Setting targets doesn't make sense to us, but we do believe in reading the market's tea leaves, and the outlook is healthy. However, frothy sentiment has us a little concerned in the very near-term. Investors need to be mindful of complacency, but also to make sure they're not still loaded up on bonds—a major capitulation from bonds to stocks is possible.
2010-12-17 Fed Decision: Stick to the Status Quo by Liz Ann Sonders of Charles Schwab
The stock market may not be fighting the Fed, but are bonds? Treasury yields and stocks can rise simultaneously, but dollar strength could bite. Investors are being driven to reallocate away from bonds and toward stocks.
2010-11-29 Not Fade Away: European Debt Crisis Hits Markets by Liz Ann Sonders of Charles Schwab
Optimism is waning as global concerns are taking center stage, notably in the euro-zone. Investors shouldn't be complacent, but should heed the more-positive message coming from the US economy.
2010-11-16 Touch of Grey: Market Takes a Breather by Liz Ann Sonders of Charles Schwab
My best guess as to the scenario that is unfolding is that the economy is gaining traction, which could cause the Federal Reserve to pull QE2 into the dock sooner than expected. It could also lead to a lift in the dollar, a related pullback in commodity prices, and rising bond yields. Given the high correlation recently between bond yields and stock prices, if yields were to continue to rise, they could take stock prices up with them; especially if the reasons are a better economy and lessened deflation fears.
2010-11-04 Moment of Surrender: Musings on the Election and Fed Policy by Liz Ann Sonders of Charles Schwab
Neither the midterm elections nor the Federal Reserve announcement of another round of quantitative easing brought surprises. Tax clarity needs to come next while uncertainty about the implications of QE2 remains front and center. Investors will likely be among the winners, but they need to understand the pros and cons of Fed policy.
2010-10-20 Dirty (Paper) Work: Foreclosure Mess Gets Messier by Liz Ann Sonders of Charles Schwab
Moratoriums on foreclosures, and the reasons behind them, bring back fears of 2008 all over again. These fears will likely cement another round of quantitative easing by the Federal Reserve. Even if 'Foreclosure Gate' blows over, investors shouldn't make too little of a potentially big problem.
2010-10-08 Is the Flattening Yield Curve Good For Stocks? by Liz Ann Sonders of Charles Schwab
The flattening yield curve has investors asking questions about what it means and whether it is bad for stocks. Charles Schwab is not concerned: Historically, a narrowing of the yield curve has been tied to stocks performing reasonably well.
2010-10-05 Win, Lose or Draw: Do We Have a Win-Win Scenario? by Liz Ann Sonders of Charles Schwab
U.S. stocks are not expensive and they're most certainly under-owned. Most individual investors are either pessimistic or indifferent about the stock market, suggesting the 'wall of worry' - the contrarian nature of the market to perform best when pessimism is highest - is alive and well. In the near term, the stock market is likely overbought, and a little pullback to improve the sentiment picture would be helpful. On the other hand, however, strong stock market would be a terrific confidence builder, as Alan Greenspan noted last week.
2010-09-14 Autumn Leaves... And Election Cycles by Liz Ann Sonders of Charles Schwab
The passion is palpable about the upcoming November 2 midterm elections, and more and more market watchers are starting to study the historical election cycle to see if it provides any clues as to how stocks are likely to behave in the near term. It's also September, historically the weakest month of the year for stocks, and this year it's following a bruising August. But here's a word of caution for those relying heavily on past performance trends: In five of the past six years, the market was actually up in September.
2010-09-01 Land of Confusion … Bubbles and Omens Dissected by Liz Ann Sonders of Charles Schwab
Charles Schwab is sticking with its view that the recovery is square root shaped (a 'V' followed by a stall), and there's little question that we've entered the stall phase. In addition to the havoc the stall has wreaked on stock market volatility, it's taken yields on Treasury bonds to near all-time lows. This, of course, has generated a very strong upward price move in bonds (as bond prices and yields move inversely) and much talk about a 'bond bubble.' That could be the case if yields move higher, which could trigger a swift move out of bonds as an asset class.
2010-08-16 Late Summer Slumber? by Liz Ann Sonders of Charles Schwab
The stock market rallied nicely in July after reaching the bottom of its recent range. Incoming data remains mixed but indicates that the economic expansion continues. However, risks remain elevated. The Federal Reserve downgraded its view and is discussing how to combat possible deflation, while federal and state governments continue to grapple with budget issues. Chinese growth has slowed, but the stock market is providing some positive indicators. Central banks around the world are creating a muddied picture.
2010-08-04 Back to Zero: Deflation Fears Emerge by Liz Ann Sonders of Charles Schwab
The current high correlation between stocks and bonds has only two historical precedents - periods when deflation was a reality, or when it was a fear. Low inflation is the reality today, but worries about deflation have still wreaked some havoc on markets. The latest rally may be based on a combination of waning deflation risk and the lessened likelihood of a double-dip recession.
2010-07-31 Bull/Bear Standoff by Liz Ann Sonders of Charles Schwab
Bulls and bears both have strong cases. With earnings results and economic data indicating continued growth, we lean toward the bullish side—although risks to the bullish case are elevated. Uncertainty and concern regarding government actions continue to weigh on sentiment, while the Federal Reserve leaves all options on the table. Some questioned the credibility of European stress tests, but the market responded favorably. Meanwhile, China's growth appears to be moderating but remains relatively robust.
2010-07-13 Double Trouble: A Slowdown, Not a Meltdown by Liz Ann Sonders of Charles Schwab
Double-dip recessions are historically rare, but fears about them are less rare. One key indicator has flashed a recession warning, but several more tell a more positive story. Investors need to be objective, not emotional, when reading the economic tea leaves.
2010-06-24 No Surprises from the Fed by Liz Ann Sonders of Charles Schwab
The Federal Open Market Committee surprised no one with its decision to keep the Fed funds target rate in a range between zero and 0.25 percent, where it's been since December 2008. The new statement marked the first time since the economic recovery began last summer that the Fed had to slightly dial back its language about the pace of the recovery. Stocks rallied immediately after the announcement, but in light of rampant intraday volatility lately, it's way too soon to judge if there will be any longer-term impact.
2010-06-18 Life in the Fast Lane: Volatility and Uncertainty Abound! by Liz Ann Sonders of Charles Schwab
A 'square root' recovery is the most likely scenario: a V-shaped initial recovery followed by a flat-line period of growth. With the peaking in the US leading indicators in April, a likely double-dip in the euro area, slowing growth in China and rising US taxes, the beginning of a soft patch for the economy is likely upon us. This next phase has been accompanied by heightened volatility, a characteristic that is unlikely to go away. However, the current rally off the recent lows has legs.
2010-06-03 Some Days Are Better Than Others... Just Not These Days by Liz Ann Sonders of Charles Schwab
The wall of worry is back - and that's not a bad thing. Thanks to the correction, valuation has improved, while excessively bullish sentiment is no more. Growth estimates should be pared back for the second half of this year and next year, as well. Europe's debt crisis has become a deflationary event. The Treasury yield curve presently predicts the risk of a recession this year or next, however, as near-zero. The most likely shape of the recovery continues to be a 'square root,' with a V-shaped recovery followed by a leveling out of growth.
2010-05-17 Volatility on the Rise by Liz Ann Sonders of Charles Schwab
Volatility in stocks has increased during the past several weeks as investors have grappled with numerous global concerns. Is this the start of a longer-term problem or is it just a short-term phenomenon? Developments in the housing and job markets hold the key to further economic improvement. Meanwhile, the European debt crisis was addressed with a massive package, but long-term issues remain, and China's rapid growth rate could lead to overheating and inflation.
2010-05-04 Typical Situation: Do We Have a V-Shaped Recovery? by Liz Ann Sonders of Charles Schwab
The same leading indicators that warned of the recession in 2007 have been recently pointing to a strong recovery in the United States and globally. Ignoring them in late 2007 and again in early 2009 were both mistakes, particularly from an investment perspective. Concerns over Greece and contagion gave the market some indigestion last week, but a period of consolidation was not unexpected given prior market strength. Overly bullish sentiment (a contrarian indicator) still needs some working off, but the technical underpinnings for the market remain healthy.
2010-05-01 Resilience Resonates by Liz Ann Sonders of Charles Schwab
The stock market has absorbed numerous body blows recently, but continues to chug along—waiting for a big price correction to buy could be detrimental. Economic data remains solid, confounding some recovery skeptics and providing the Fed ample reason to slowly return to normalcy. European debt problems are growing and concerns over contagion are rising; there's no quick fix, and some politically unpopular decisions are going to have to be made.
