Schwab's Sonders: Are We 'Just a Shot Away' From Economic Recovery?
Pondering Rolling Stones lyrics, Schwab's chief investment strategist is skeptical that a vaccine will cure all of our pandemic-related ills.
Calling herself a “rock chick,” Liz Ann Sonders quoted a Rolling Stones line that resonates amid the coronavirus pandemic: “Just a shot away.”
“What a great line as we think about vaccines, and is that the answer to all that ails us/?” the Schwab chief investment strategist said Wednesday at her firm’s annual Impact conference. “Is that going to be a turning point, or are there other forces that will come into play between now and then?”
A COVID-19 vaccine “is an absolute necessity. But at the moment [until] we hear it’s readily available, there will be a lot of questions, i.e., [about its] efficacy, how available [it will be], the order of recipients, how many times [it has] to be taken, the logistics of storage … , etc.,” Sonders said.
There’s “a whole series [of issues] that we have to be mindful of … ,” she added. “I’m a little concerned about this thinking that a vaccine is the end-all be-all.”
Haves vs. Have-Nots
Sonders described how the coronavirus pandemic has and will continue to affect the economy and financial markets.
“The pandemic has exposed the widening gap between the haves and have-nots. You can see it in economic statistics, you can see in market data, see at the micro level,” Sonders explained.
“Those in upper echelon of income perspective have more flexibility to work from home. Some of those on lower end don’t have that flexibility,” she said.
“And those vast differences have been exposed not only by virtue of pandemic’s impact on economy, but exacerbated by the disproportional impact the virus itself has on many of these people,” added Sonders.
“You really see that division occur, hence the reason of using the ‘K’ to look at in a snapshot,” the strategist said, referring to a K-shaped recovery, in which some groups thrive again while others continue to struggle.
Data Tracking
“High-frequency measures … have become more important during the pandemic, everything from mobility trackers to OpenTable seated diners and TSA throughput,” Sonders said.
“One example in comparing the U.S. to many places in Europe: Workers in Europe who are furloughed are still considered employed, even if the companies may not be able to bring them back on,” she explained.
“Yet in United States, furloughed workers are at this moment considered unemployed,” Sonders said.
“Think of the differential when comparing things like employment rates and other labor statistics, as they really vary, even from region to region, on how [we] traditionally calculate numbers, let alone accurately calculate numbers in a pandemic,” she added.
Market Matters
“The market is overvalued by standard [price-to-earnings] metrics,” Sonders said. “But what is misunderstood is that even though it is quantifiable historically, P/E is a sentiment indicator more than anything else.”
Thus, “P/E is terrible a market-timing tool…,” she stated. “But yes, in simplistic terms, the market is expensive.”
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