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.