Charles Schwab’s (SCHW) chief investment officer, Liz Ann Sonders, says we are in the “mature on optimism” phase of a market cycle, which means it’s time to get back to “tried and true” strategies, she explained early Thursday on Bloomberg TV.
“I have highlighted that I think we are in that third phase, that mature on optimism phase [as defined by investor Sir John Templeton], in which, in a secular bull market … you have more bouts of volatility, more mood swings in market and more frequency of pullbacks,” she explained.
This means that plenty of investors are anxious, if not paranoid, about what to do when the market weakens, giving financial advisors a potentially key role to play by providing clients with discipline and support.
In the current market environment, “You have to go back to the tried and true: diversification, global tactical asset allocation and discipline around things like rebalancing, which is kind of a boring thing to talk about, but it forces investors to do what we are supposed to do: buy low, sell high,” Sonders said. “When left to our own devices and our own emotions, investors just don’t do behave like that.”
She sees today’s equity markets as resembling those of the mid- to late-1990s. “And there are a lot of analogies to ’98, given what is going on globally and with oil prices,” Schwab’s investment strategist explained. “It’s going to mean a continued battle between short-term and long-tern sentiment.”