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Charles Schwab Chief Investment Strategist Liz Ann Sonders discusses investors’ biggest concerns in the current quarter.
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As there is always many issues weighing on the minds of average investor -- taxpayers from corporate earnings to the looming fiscal clip to the say the housing market.
Here to weigh in with what she's advising clients -- -- Saunders chief investment strategist and senior vice president of Charles should swap.
We -- great to have you on the show tonight thanks so much for being with us nice to be here thanks for having me I wanna start with corporate earnings lot of people not too happy about them we have only 7% of the S&P 500 reporting so far.
What trends do you see emerging.
What I think -- May be similar to the second quarter where ultimately we find out that maybe analysts set the bar a little bit too low.
And what what defines whether it market does well or whether individual stocks do well is less about absolute earnings -- more about where they come in relative to expectations so I think we may.
Get a little bit of a bump by virtue of the of exceeding that lowered bar my concern is a little bit more into the fourth quarter and into 2013.
Where I think estimates are still a little bit too high and have to come down.
-- think will underperform in that environment.
Well I think -- India -- and then the -- -- -- number one to look at forward guidance I also think there's going to be divergence.
Between those companies that have morbid domestic orientation and then we -- -- that it tends to get very industry specific.
And those companies I think are likely to do a little bit better vs maybe some of the big multinationals and the more materials and industrial space.
That have exposure to places like the European Union as well as to slowing growth in China so I think that will be one -- a economies within this earnings season is that separation.
From domestic Korean it companies internationally -- -- -- -- say one of the best price factors is gonna be banking the financials do you see that continuing.
-- you know may not be as extreme as what we've seen as we've launched a quarter and in the numbers -- don't really tell much of a story yet with hedges suggests only 7% of the S&P have been reported.
But so far -- the good news is.
That financials do have the most positive surprise factor we did by the way recently go to an outperform rating on financial so it certainly music -- -- here's the.
I guess now yeah well what any issues that concerns me very much and I am sure concerns -- -- Charles Schwab.
Is that small investors are getting out of the market they pulled up -- 138 billion dollars from.
Stock funds an exchange traded funds since March 2009.
A lot of people out there thinking boy I guess I'll just get into bonds I'm gonna go somewhere I think it's safer.
Probably making a bet that may in the end come back and bite them.
What do you think.
Yeah -- look I think there's a lot of demographics associated with that when you look at things like mutual fund flows you do have to concede that that does not include flows into exchange traded funds and that's cold.
Some of the equity business that said if you combine all that.
There is -- question all of the men.
Discouragement about the equity market which is surprising in light of about a 120% gain in stock since the low of march of 2000 and not and I think it reflects.
Muscle memory from the pain of the 2008 period of time the -- decade or the lost.
Twelve year period.
So it is understandable but what I think many investors have to realize is that having too much of the focus toward risk aversion moving all assets and a fixed income.
In the case of something like -- treasury.
You are basically locking in a negative real return meaning.
Yields do not exceed inflation -- a some investors who are willing to accept that because of that guarantee of what the return.
Will be but we think a lot of investors are missing out.
Longer term entity in the opportunity of actually outperforming inflation -- I wanna bring up housing because you're optimistic about housing -- just had re -- come to market today get pretty well as an IPO.
Is this it a trend that has legs.
I do I think it has -- we've had five consecutive quarters our residential investment which is the housing component of GDP has been a positive contributor I think that we'll continue to be the case.
To a greater degree -- housing is less.
Has less weight in the economy than it did six years ago or so by nature of the bursting of the bubble but that is starting to pick up.
And that's not only are nominal mortgage rates at a record low but now the real mortgage rate has gone into negative territory what I mean by that.
Is home prices are appreciating -- -- you can borrow at a three and a half percent rate thirty year fixed mortgage.
To buy an asset now appreciating at a 10% rate and that's the latest NAR data for home prices so.
Three and a half nominal minus 10% rate of appreciation in homes is a negative six and a half real more -- that's really attractive.
That is really attractive let them think for coming on very Smart commentary hope -- come -- -- thank you so much -- Thank you.
