Schwab’s Sonders: Market Headed for ‘Non-Recession Bear’

“I hear the bears outnumber the bulls at this conference, right?” asked Charles Schwab Chief Investment Strategist Liz Ann Sonders at the start of her closing keynote speech Wednesday at Inside ETFs 2016 in Hollywood, Florida.

“We continue to be somewhat cautious, as we have been” since early 2015, she explained to a crowd of about 2,000 financial advisors and other professionals. “But … we believe we are far from a market top.”

Looking at a long-term horizon, “The secular bull market isn’t dead. But we have to expect more bouts of volatility. In the bull market from 1982 to 2000, there was the crash of ’97,” Sonders explained.

“Still, it’s a tough road to hoe,” she explained. “There’s a greater likelihood of bounces and pullbacks as has panned out recently. Last year, we were violently flat.”

Sonders went on to explain Schwab’s belief that while in the longer term we are in a secular bull market, we are most likely “exiting a [short-term] post-echo bull market and going into a [short-term] echo non-recession bear… Non-recession bears are not as painful as recession bears,” she stated.

On Twitter, the strategist shared this clarification Thursday: “If [the current market] correction gets worse, it would be more likely be a non-recessionc ‘bear’ and than a full-blown recesson bear.”

According to statistical research that she shared at Inside ETFs, there have been seven non-recession bear markets since 1968. They last an average of about 200 days. In the most-recent such market in 2011, the drop was 17%.

In addition, she said, “The volatility and correction we are seeing are not so outside the norm when the Federal Reserve moves into a rate-hike cycle.”

Nonetheless, these are not easy times for advisors and their investor clients. “It’s the hardest time since 1937 to make money … with no major double-digit-performing asset class” in sight, Sonders said.