We had Schwab strategist Liz Ann Sonders on TechTicker this morning. She made a great call on the recession ending last summer, back when everyone else thought the world was going to end. She’s looking for a “choppy” year this year, but notes that right now, we’re in a v-shaped recovery.
Aaron Task: There is “a momentum building up” in the U.S. economy and the odds of it faltering have “fallen very significantly,” former Fed chairman Alan Greenspan declared Sunday on ABC’s “This Week” program.
Generally speaking, Liz Ann Sonders agrees.
“I’m amazed people still say it’s not a ‘V’-shaped recovery, which to means they’re simply not looking at the charts,” says Charles Schwab’s chief investment strategist, who called the current recovery last summer — long before it was evident to most of her peers. And by “charts” she doesn’t (just) mean the stock market but trends in both leading and coincident economic indicators, industrial production, and inventories. “They’re all ‘V’,” she says, suggesting many observers are overestimating the impact of consumer spending on both the 2008 downturn and the recovery to date.
Even leading indicators of jobs, including jobless claims and temp hiring, are pointing to growth akin to the strong 1983 recovery vs. the “jobless” recoveries of the early 1990s and 2001, Sonders says. Friday’s report showing 162,000 jobs created in March “doesn’t mean we’re off to the races” but the “natural precursor to job growth is there.”
Rather than questioning the recovery, the “more valid debate” is whether the V-shaped pattern that’s emerged is “the left side of a ‘W’ or [part of] a square root sign,” Sonders says. “More likely the worst-case scenario is a square-root type recovery. Other than some massive policy mistake akin to the 1930s…the risks of a [‘W’-shaped double-dip] are relatively low.”
So what does that mean for investors? Stay tuned for part two of our interview with Sonders.
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