Momentum as a factor in the markets is still strong, says Charles Schwab's Liz Ann Sonders

Let’s break down today’s action with our first guest, Charles Schwab, Chief Investment Strategist. Lizanne Saunders. Welcome Lizanne. So some semis and riskier names were lower tech sector was down a lot compared to the next lowest industrials. Here you like materials and financial set the table for us. Why materials and financials over some of the other options and and energy by the way too, Yeah, so those have we. We relaunched what we call Schwab sector views earlier this year after a 2 year hiatus for a whole variety of reasons. It’s not worth going into detail, but we relaunched them. It’s factor based analysis that drives the app performer underperform ratings. And really since we relaunched, there was that cyclical bias, some of those classic cyclical of energy, financials and materials. And we look at a number of different categories of factors like value and growth, but also stability and sentiment. And those are the ones that that screen quite well, particularly in some of the value categories given their lack of participation in a year like last year that was so dominated. But what I think of as the growth trio of tech consumer discretionary and communication services. So that’s just where the research suggested the opportunity was in in a year where you’ve had a resilient economy and that really goes to the benefit of of many of those traditional cyclicals, Yeah, global economy pretty strong. When I look at energy, I wonder how much geopolitics is putting a floor under where it is right now and how long that’s sustainable. But you think that it has legs even from here. Yeah, I mean obviously you’re at the mercy of shorter term moves up and down in oil prices. It will drive what the the sector does. And as it relates to things like geopolitics, I I have no clearer crystal ball than anybody else as to what those machinations will be. But you also have an improving earnings profile as well on the out years. So that gives you that better value on a on a forward earnings basis. But you’re absolutely right, you will likely have volatility driven by well prices. In the meantime though, momentum is a factor, continues to be fairly strong and that’s where momentum has to be. Have to remember that momentum is considered a factor, but it’s almost more of a concept. It means that the types of stocks that are working continue to work. It doesn’t specifically mean sectors like technology. We often, I often hear from investors when they hear momentum, they think, oh, that’s tech stocks or communication services stocks. No, it it it’s just a way to describe what is working in the market and the repetition there and that is clearly there’s been a lot of momentum and energy, OK. We have our first earnings report out CSX, the Eastern Freight Railroad posting a beat on both the top and bottom lines. EPS coming in at 46 cents per share. That was a penny better than expectations. Revenue of 3.68 billion also slightly better than expectations. Total volumes up 3% year over year, so that was better than the street had been anticipating. Intermodal volumes of 7%, coal up 2%, merchandise it looks like was flat. In the earnings release, CEO Joe Hinrichs saying we are pleased to see our consistent customer service performance lead to volume growth. They remain focused on improving their reliability and fluidity, fluidity of the network and that leading looking ahead, favorable trends across many of the markets they serve. They’re eager to build on that momentum for the rest of the year and beyond. You can see shares are popping more than 1% right now. I will actually talk to CEO Joe Henricks tomorrow in an exclusive interview that kicks off 10:00 AM Eastern on a squawk on the street. But in the meantime, Liz Ann, just to go back to you here for a moment, in terms of what we are seeing in certain, I’d argue, leading indicators of the economy like freight for example. I mean, I just look at the JB Hunt numbers yesterday after the baller or Knight Swift in general. It’s been pretty soft and I just wonder how much we can read into something like transports or semis which have have sold off a little bit here recently or or some of these other economic, what are seen as economic indicators to sort of understand how much the economy is slowing or if it’s slowing at all. Well, we’re not seeing much slowing on the consumer side of the equation and that’s so dominant at at 68% of of GDP. But you have seen signs of softening particularly recently in areas like housing, industrial production. So I think we continue to be in this very funky economic backdrop where you have these sort of rolling contractions then you have some rolling recoveries, but a heightened level of sensitivity to things like moves up and down and yields. We had seen that pick up and a lot of housing activity yields move up and you start to see some compression happen very quickly. You see bigger swings in a shorter period of times and things like capital spending intentions and that’s in part due to uncertainty with regard to Fed policy. So I I think it is it is not a you know rising tide is either lifting or pressure sharing all boats you’ve you’ve got a much more dynamic and nuanced cycle really since the beginning of the the pandemic.