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. She says that one of the reasons so many were talking about a possible bubble in stocks late last year is that “there is almost paranoia about staying in the market during the next big downturn. Everybody is looking for that next crisis.” That’s a good thing, she says, because it means there’s an underlying base of pessimism that’s acting as a wall of worry for the market. Sonders says that sentiment measures did get a little high as last year went on, though investors’ actions didn’t seem to mirror their attitudes. She’s actually hoping that we will have a correction to knock some of that attitudinal sentiment out of the market. Sonders also says she thinks that the market will respond positively to a continuation of the Federal Reserve’s QE tapering approach. The days of bad economic news meaning good things for stocks because that meant QE would continue are over, she says. She thinks the path higher for the market now involves good economic news and continued tapering.
