Bright spots in the U.S. economy, according to Charles Schwab Chief Investment Strategist Liz Ann Sonders, include housing and manufacturing, with a “renaissance” biased toward energy and autos. For every 100 jobs created in petroleum refining, additional related jobs created total 1,190, she said during her keynote speech at the recent Morningstar ETF Invest 2012 conference in Chicago.
Manufacturing is showing signs of coming back to the United States as worker wages are flattening; China’s wages are increasing at a rate of 160% while the U.S. is a negative 3%. “The economy is actually creating stuff and not just paper wealth,” Sonders explained.
As for what good news lies ahead for investors: “The biggest rallies come when economies stink,” according to Sonders. She went on to remind attendees at the conference that even though the concept of diversification has gotten a bad name during this period of “risk-on/risk-off” volatility and market correlation, diversification nevertheless remains crucial in volatile macro times. The cycle still favors a combination of asset classes; plus, Sonders predicts an upcoming period of stable economic growth.
Of course, the U.S. still has a debt crisis and a fiscal cliff to contend with, Sonders acknowledged. Throwing “the really ugly part of the story” right into the middle of her speech, she noted that the strength of U.S. GDP has waned as debt growth has surged.
Yet U.S. consumers’ stresses have eased significantly, Sonders said, pointing to her own “consumer stress index” of stocks, income and inflation. That index has come way down as the recovery takes hold and homeowners are seeing very low mortgage rates and rising home values, she said.
–James Green contributed to this report.