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Charles Schwab senior vice president Liz Ann Sonders weighs in on the current state of economic and market sentiment.
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-- would go to the markets now with stocks down a little bit today although our next guest is bullish long term that she wouldn't mind seeing little more pessimism short term -- and -- senior vice president.
Chief investment spreads.
Charles Schwab is here.
Was -- -- talk about pessimism we still don't see money going ending US stock funds said.
They've -- retail investors look past missing maybe that's a good thing well you know I think it's the big difference between.
What are investors saying what they do a lot of the senate measures and I keep track cover attitudinal measures they're they're asking.
People for their opinion about the market -- those of on unquestionably -- a lot more optimism but we look at things like fund flows.
It's not reflecting itself yet where people are actually putting their money and that's why.
My my concern in the short term is is fairly minimal I don't think we're gonna have a big hit to the market because we haven't yet seen that capitulation back into the market.
-- you're talking a little bit there about psychology of of markets but fundamentally do you like what you see right now both from the economy and from the market but we've had 25 consecutive weeks -- better economic news we're seeing a broadening of the recovery -- in the expansion phase -- starting to incorporate.
Greater amount of jobs growth housing has become a positive contributor to GDP small businesses participated to a greater degree -- lending growth has picked up.
We've got that the Fed not giving us say third round of quantitative easing which I think is -- good -- we're seeing some strength in the dollar all of which I think.
Are good signs for the economy and translate into why the market -- done as well as has since last October.
We've heard Ben Bernanke maybe protesting a little too much about -- economic growth there were saying.
You have starting again again in the last week or so that could be as low he needs to keep interest rates where they are -- -- percent.
Nevertheless though it seems like one of the it neither is good because if the economy's really improving longer term interest rates are going to go up and they have snapped back somewhat.
And it Ben Bernanke is right that's not good for stocks either so.
Well look at hot I invite I think actually a happy -- would be if long term yields have that if the Fed stops trying to control those either through jawboning or things like Operation Twist.
If they were to start to move up in reflection of economic reality which I think is a bit better.
I'm not so sure that's a negative thing first mother coming up for a very low absolute basis I don't think they were present competition against stocks.
I also think it may -- some fence sitters off the fence whether it's mortgage borrowers or even you know business borrowers.
I think it.
This this constraint has been I don't have to worry about it I'm on the fence -- -- stay on the fence that's gonna keep things easy for as far as the eye can see.
I actually think it might -- triggered to initiate some activity.
But why are people like Bernanke not the only one -- is the Fed chairman's we -- so much about ads cautious for lack of a a better job that they almost like when you listen to speak and it's always this.
Trying to read between the lines you think -- wonder if you know something that -- I think.
The first I think there's two prongs to it personal he's a student of the Great Depression the realization that the Fed jumped in too early to tighten rates in 1937 -- and another big downturn.
He would rather fight inflation let that get out of control and try to fight deflation which is a tougher thing.
But also he's aware of the effects of deleveraging on an economy and even -- an optimist I concede that deleveraging particularly now that it's coming from the federal government.
Is going to keep the lid on the ability for the economy to grow that take that long time 3% growth with you know less inflation and that that's not about an arm trailing average because you took the risk to balance sheet risk office individuals and companies -- on -- right so I think the private sectors come -- long way in their deleveraging debt service ratio was actually now in -- zone that is considered very very healthy.
But we still have it ahead of us for the public sector the good news is is that at the state and local level.
A lot of the big cuts there already behind us and -- that actually may be a positive economic contributor.
As soon as early next year federal long way to go was in -- -- thank you so much Liz and Saunders from trough.
