Liz Ann Sonders, Senior Vice President, Chief Investment Strategist at Charles Schwab see as main concerns for equities the ongoing trade war uncertainty and the possibility that the market has gotten ahead of the Federal Reserve.
“New market highs are always worth cheering, but keep in mind the limited movement overall in U.S. stocks over the course of the past 18 months. If a recession is coming, we will likely look back at this period as part of a topping process for stocks (tops generally are processes over time; bottoms are typically more V-shaped moments in time).”
“Aside from ongoing trade war uncertainty, our other concern is the possibility that the market has gotten ahead of the Fed. With fed funds future now discounting more than 100 basis points of easing by the end of next year, equities may be at risk if the economy’s deterioration supports that much easing; but also at risk if the Fed under-delivers. If the economy hangs in there and rate cuts are simply insurance cuts, the additional accommodation could be a sufficient offset to the negative effects of the trade war.”