The bull market should continue to run, but expect a little more drama, according to Schwab’s Liz Ann Sonders, Jeffrey Kleintop and Brad Sorensen.
In the trio’s latest market perspective, they address several reasons why this may be expected.
First up is an anticipated melt-up. “U.S. stock market gains have accelerated in the first month of the year, leading to the appearance of a melt-up or blow-off phase of the bull market,” according to the report.
The report notes that melt-ups can last for “a decent amount of time” — so investors who bail could miss out on potential gains.
While this move is still in its relatively early stages, it could be a catalyst for a pullback at any time.
And, according to the report, more frequent pullbacks and volatility could be seen this year.
“With optimism elevated and valuations rich, the cushion in the market has been reduced—which could lead to more volatility and more sizable pullbacks this year than we saw last year,” the report states.
According to the report, some of the potential risks to the current rally may come from Washington.
While the market has largely ignored the “shutdown” drama, the report wants that investors should not become complacent about the risk of political dysfunction.