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Charles Schwab Chief Investment Strategist Liz Ann Sonders on the outlook for the markets.
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-- My next guest says that kind of volatility isn't surprising.
In the face of heightened optimism joining us now with their outlook -- these markets Charles Schwab chief investment strategist senior vice president was -- offers good to have you with us.
-- -- to be here let's start with that volatility.
You're you see this is there a reflection of optimism.
Well I you know we had extraordinarily low levels of volatility for the past couple of times the market was rallying up off in November lows -- pick up that we've seen is it anything resembling the kind of volatility that we saw saying 2010 and 2011.
But when you get optimism opt to the kind of level where we saw inconsistent with the rally it tends to suggested in the short term you may have a consolidation phase.
Which by its nature probably means some more swings.
Some more strings and springs lower with every -- -- infer.
I you know I think we probably are due for a bit of a pullback here I don't think it's anything of the sinister variety there's no indications in terms of -- or other technicals that this would be anything more than just maybe a little bit -- -- pause.
I think the path of least resistance for the market is still apple when you get sentiment to those elevated level as you do tend to have a little bit of consolidation.
Does that argue that you're excited about the level of earnings I I -- a number of strategists and and and managers.
And they get this sort of a mixed feeling about at all but there seems to be a divide the your thoughts.
Look at it it relative to expectations it's been a good earnings season you have almost.
You know the in the sixties the high sixties and -- a percentage of companies that are beating estimates now.
Admittedly that estimate bar had gotten lower.
Because there was so much concern particularly around the fiscal cliff and other uncertainties having it to 2013.
So what we're finding is that companies are simply -- -- lowered bar that's set I do think.
This quarter the first quarter -- thirteen.
Could mark the trough in earnings may be the second quarter and from there will pick up again a little bit not too.
Stellar year of your growth rates but I think the concern that earnings were really gonna fall off a cliff that -- -- last year is not coming to fruition.
We have a big inflow and to the equities.
Market.
And in January.
And and I substantial increase in the in the if the depreciation.
A price are we going to see is there any way you can tell us what you foresee.
In the way of inflows will it continue will -- bill.
Well look you know they're calling it this great rotation were ostensibly.
Will be out of bonds and bond funds into stocks that's actually now we've signed January ditzy tremendously huge inflows.
Into stock indices -- you also -- into other asset classes interestingly including bonds.
Where the money came to fund these inflows was actually cash now.
Some of it was sort of the vagaries of the tax accident that passed what we've got over the tax piece of the fiscal cliff so there was a lot of are pushing up bonuses and other compensation and special dividend to to end of the year so.
It temporarily boosted cash levels have been found its way into the market January's also typically a strong inflow month.
I think we are going to see better flows but I wouldn't take the magnitude of the numbers in January and start to extrapolate that fully through the rest of the year sort of sort can't take that times twelve.
I would I would not take a test well -- her not many year.
You know what -- what do you expect this market to do this year was that.
Again I you know what we we think it's actually fairly -- exercise to try to do year -- targets like I don't venture harness -- Gallagher I wanna get a sense of what's gonna happen.
I think the market you know all time highs are within the S&P in the Dow's sites and I -- I don't think it'll be that herculean task for the market to take those out whether it doesn't in a straight line between now and then probably less likely.
I do think the second half in terms of the economy looks a little bit better so I would say yeah I think the market looks pretty good this year.
We'll take up was that sun it's always good -- equipment up next the.
