While some fear that a decline in corporate earnings growth will send the stock market tumbling, Charles Schwab Chief Investment Strategist Liz Ann Sonders says they’re off base.
“There is this misperception that the minute the peak of earnings happens, the market is going to fall out of bed,” Sonders tells Bloomberg Surveillance. “The market tends to continue to fare pretty well unless you get some sort of massive collapse in earnings, which I don’t think is in the cards this time.”
Sonders says the high correlation in risk assets makes for tough times for investors, but she doesn’t think the high correlation levels will stay forever. “We have been in a risk-off environment,” she said. “Most risk asset classes are very highly correlated. Diversification in a highly correlated world just doesn’t work. I don’t think it’s a permanent fixture, but it makes it even tougher for individual investors to navigate.”