Charles Schwab's Liz Ann Sonders warns investors about committing a 'fool's errand'

I want to bring in Charles Schwab and company chief investment strategist, Lizanne Saunders. Lizanne, you pointed out that these cyclical names have outperformed defensive names. How does that inform, know how people should be approaching investing right now? Well, every investor is different obviously. So there’s one not one cookie cutter answer, but we at Schwab did launch what we call sector views or relaunch after two year hiatus for a vast majority, a large majority of reasons. And we have had a an outperformed bias toward those cyclical sectors like energy, materials, financials. And that’s where performance has been strong and I think it reflects the pickup in economic growth corroborated today of course by the upward revision to GDP and maybe putting further in the rearview mirror concerns about recession. And that’s been supportive of cyclical sectors. But aside from sectors, what we’ve been advising investors is still be factor oriented, even if you’re honing in on certain sectors, meaning invest based on characteristics and they were saying you still want to stay up in quality because this is a period of uncertainty with regard to Fed policy, geopolitics, etcetera, and that you want to stay up in quality. This is not a time to go down the quality spectrum. You know, listening to what you just said and then thinking about the last time we heard from Jay Powell, he seemed to kind of say, yeah, we may have a moment or moments like this, but ultimately this economy and this market is going where they think it’s going to justify three rate cuts. Do you think there’s going to have to be a point sometime soon where the Fed acknowledges what the what the markets are telling us? Well, so right now actually in light of of Governor Waller’s comments last evening which were a bit more hawkish, you have seen in terms of the Fed funds futures market go to now less than three cuts expected which is less than the so-called, you know dot plot. That said what Powell is always quick to remind people of, rightly so is that the dot plot has nothing to do with the policy path. We have a data dependent Fed, it is going to depend on the data. We’ve already taken four rate cuts out of the mix just since the beginning of the year here and move the start point from March to something more like June or July. And and that’s a moving target and it’s based on the data which is obviously why things like tomorrow’s PCE report as well as next week’s jobs report remains key to to those expectations. You know, I I like for like the last year every time we said and we should have all the answers tomorrow after we get XYZ or this and that and we almost always have more questions. Let me ask you about this year to date moves in different asset classes. So essentially everything is up, the S&P the the stock market’s up, the world markets are up, the real yields are up, oil is up, copper is up, the dollar is up. I mean they they usually don’t all move together right. What’s the how do you how do you decipher a message when typically you know you can almost say OK, if stocks are up and these are up it’s it’s just it’s does this point to maybe a certain underlying giddiness where people believe this is in everything rally And if that’s the case does that add extra risk? Well, keep in mind your blue bar there that’s bond yields which means bond prices have gone down. So it it’s not an everything rally in the sense that at treasuries on a year to date basis from a price perspective are negative. But clearly when you see it across commodities, when you see it across the equity market and you see a higher trend in yields, it reflects a stronger growth backdrop and even maybe some slight improvement outside the US. But the US has a much better growth profile which helps to explain things like the move higher in the in the dollar. So for now the data is is very supportive of all those bars. That doesn’t mean it’s going to last in perpetuity, but that is largely a reflection of stronger growth. Yeah, I I just think that maybe that bonds, bonds are in a holding pattern to me. They actually should be maybe even higher considering the yields. Hey, before I let you go, you were talked in the US we have, we have these elections coming up, emotions are running very, very high. How does that influence the market? Well, don’t. Don’t let your own emotions, regardless of whether it’s about the election or anything else, affect your investment decision making. I think now is probably just as good a time as any to to think whether it’s based on on past mistakes you might have made or your own history to judge whether your financial risk tolerance and your emotional risk tolerance have a wide gap between them or a narrow gap between them. But, but trading around your own emotions, especially tied to an election, and this is going to be an emotional year as it relates to the election, I think it’s a fool’s errand. And I I would be really cautious about trading around the election. Thank you. I hope you don’t mind if we bring you back a couple of times to remind the audience of that before between now and the election. Thanks a lot, Lizanne. Appreciate it. Thanks, Charles.