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Charles Schwab Senior V.P. Liz Ann Sonders on the outlook for the European and U.S. economies.
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Well joining me now tonight's market master -- and Saunders senior vice president chief investment strategist for Charles Schwab -- and good to have you with us.
This market is behaving.
I will say better.
And I'd like to get your assessment first as to -- Whether we've reached something of a turning point in equities in this country.
May reached a turning point this year obviously we've had a lot of volatility and unfortunately I think on until we get your past us.
We are to some degree at the mercy of what's happening over there but what I think the real story's -- this year.
Is a domestic economy that a lot of people felt really fallen off -- in the first half of the year but now we look back and realize that those.
Exhaustion -- events that that the crisis and that natural disaster in Japan and -- spike -- energy prices and weather issues did not transfer into the second half of the year we've got a lift in the economy is strong leading indicators and I think that's been the story.
As a little more than sixty days ago everybody was talking about the prospect of a double dip recession.
What happen.
While we weren't talking about that we were decidedly not -- a second recession camp but I think.
I think what happened in August with the debt ceiling really just was another hit confidence that I think that confidence factor is always very important particularly -- inflection points in the economy.
But what I think we found was that first all the micro story has been very positive all along in other words.
Corporate earnings companies doing much better.
And then more recently what we saw is that what consumers which is a big driver of our economy what they say what they do are often diametrically opposed that even though confidence.
It's up but still very weak we've had much stronger spending number -- it -- show you.
That we've got this engine churning again it's not -- booming story by any means but certainly not recession conditions.
-- look at personal disposable income it's still continues to erode much much smaller margins than previously but still eroding.
We are seeing a significant paid -- instilling consumer household debt.
Is everyone is in the midst of deleveraging.
And give assure your outlook.
If we indeed see.
Some significant progress in the European Union summit that begins this Thursday.
But I think the deleveraging story is is with us for quite some time now in the private sector in the US started three years ago.
It's being forced on the public sector now not only in the United States but obviously.
In the Arizona I think what is very positive is this sense that maybe there is cohesion on this fiscal.
Union I think Merkel which a lot of people -- is as.
Playing a bit of a -- bring game of brinksmanship I think it was appropriate to demand.
Something a little bit more concrete.
-- the numbers are similar to the Maastricht Treaty.
But there may be a greater willingness to actually monitor this stuff and stick by -- and I think governments.
Are under that increasing pressure and then you -- move on to maybe try to bring the bazooka is in to really provide the kind of liquidity community.
That I think the problem needs in the near term so.
I I don't want it -- not certainly out there saying look the problem is solved product pack here but revenues even in the last day has been much better than certainly what we expected a month or so ago.
The ratings agencies as we wrap up here -- and I just I gotta ask you.
I have standard course lost its mind its sense of timing.
It is so pathetically late to the to what is a global consciousness of -- Sovereign debt crisis.
It is breathtaking.
What what are your thoughts.
I think they have become to some degree masters of the obvious and I think that's why the market reaction has not been anywhere near severe.
As you might view if you you know observed this in a bubble as somebody said he'd get a massive downgraded fifteen countries are our our own debt back in August I think it is.
They're just reflecting the reality that we all know and that's why I don't think investors did much in terms of blinking an -- the only benefit that comes from it is maybe it's one additional little push.
That is needed to send a message that something meaningful has to be done here country by country in terms of austerity and getting these fiscal houses in order so that's about the only positive I can glean from -- -- -- right exceptionally late in the game and no big shock.
I'll throw out one other we saw the Spanish.
Yields and Italian yields.
Also declines from maybe you markets in prospect here is are.
Fruitful for Europe is what we've experienced as a result of Standard and Poor's the negativity.
Perhaps we're gonna see a bit of morality of their of their debt markets well -- under bush treasury absolutely.
Always great to see you thanks for being excellent thanks.
