Schwab Market Perspective: Reassessing Risk and Reflation

 

by Liz Ann Sonders, Senior Vice President, Chief Investment Strategist; Jeffrey Kleintop Senior Vice President and Chief Global Investment Strategist, Charles Schwab & Co, Inc.; Brad Sorensen, CFA, Director of Market and Sector Analysis, Schwab Center for Financial Research April 14, 2017

Stocks have been in a slump and investors appear to be reassessing the degree of risk they are willing to take.

Key points

· Investors appear to be shying away from risk, resulting in a pullback in stocks. We view this as temporary, although patience will be required and sharper downturns could occur within the ongoing bull market.

· “Hard” economic data hasn’t accelerated to the same degree as “soft” data (confidence/survey-based), and some convergence is expected. Political and geopolitical uncertainty abounds, while the Fed has begun to address the slow draining of its balance sheet.

· Global earnings have aided stock market gains, but the expectations bar is getting higher to hurdle. The next several weeks should show whether gains will persist or if expectations may have gone too far.

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