Charles Schwab’s Liz Ann Sonders expects the US economy to pick up in the second half, and thinks the general trend for US stocks remains upward.
“U.S. stocks still look attractive to us, with the U.S. economy continuing to gather momentum while monetary policy remains quite easy,” Sonders writes, along with Brad Sorensen and Michelle Gibley, in recent commentary on Schwab’s site. “However, risks have probably grown over the past few weeks. Tensions in the Middle East are elevated and U.S. military involvement, or a spike in the price of oil, could be the impetus for at least a short-term selloff.” The trio adds that geopolitical-driven selloffs are usually buying opportunities, assuming there’s no sustainable impact on oil prices.
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“Additionally, midterm election years have historically featured typically-midyear corrections — nearly always followed by strong rallies,” Sonders, Sorensen, and Gibley say. “Sentiment measures are showing excess optimism — indicating the market’s vulnerability near-term. We do believe a correction would be a healthy pause in an ongoing secular bull market.”
The trio also addresses inflation, saying that it shouldn’t be a problem despite a recent acceleration. But perception could be an issue. “We are still in the camp that believes actual inflation won’t be a problem, at least for the rest of this year, but concern among investors could cause some short-term bumpiness,” they say. “The Fed remains unconcerned about the very modest rise in prices at this point, suggesting the data is quite ‘noisy’ and stressed that they don’t believe they’ll have to act in the near future to counteract growing price pressures.”
Sonders, Sorensen, and Gibley also offer their take on the Chinese, European, and Japanese markets.