“It’s the hardest time since 1937 to make money," Sonders said.

“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.

“It’s a time of central bank divergences and heightened correlations,” the strategist said.

Bright Side?

“If you look at the data, things are not as bad as the gloomers and doomers say,” explained Sonders, pointing to a GDP growth chart. “We’ve had a small lift back up into positive territory, and it is better or worse that matters — not good or bad.”

Still, she shared charts on the high – or “hyper correlations” – in the markets between the S&P 500 index and the Shanghai Composite, as well as the S&P 500 and oil prices. “The market-based measures of recession risk put us at over 50%, while high-frequency measures show us at less than 10%,” the strategist said. “I put a 25% chance on it.”  

While the manufacturing and service sectors of the U.S. economy are weakening, there is bifurcation in the decline. “Will manufacturing weakness pull down services? We say no.”

Though oil prices, down 78% from their most recent peak, are worrisome, “I’m not sure if this is a bottom,” she said. “The short side for oil is a crowded trade…, and we should start to see less supply and more demand.”

The trends she tracks point to a stable S&P 500, “with no signs of an imminent risk of recession,” Sonders stated.

She expects the Federal Reserve to issue a statement Wednesday “that should calm fears that the Fed [hike] dots will be the right dots and that could give some credence to the market’s view of one or two hikes maximum this year. The Fed assumption is for four increases this year. I see the chance of that happening as close to nil.”

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