Interview with Liz Ann Sonders

Zachary Karabell (0:01)

What could go right in a world where we are so focused on what could go wrong?

I'm Zachary Karabell, and for today's installment of What Could Go Right, I am speaking with Liz Ann Sonders, who's Senior Vice President and Chief Investment Strategist at Charles Schwab. She's also one of my favorite commentators, observers, analysts of markets, and has been for more than 15 years, at least in my experience, and her acumen about the markets is unparalleled. Her role at Schwab is to develop investment strategies and to help individual investors as well as advisors understand and navigate the market. She is a frequent commentator on every news and business program you can imagine, and she is turned to by journalists, economic analysts, and politicians for her insights. She's been at Schwab since 2000 after they acquired US. trust, where Liz Ann had been a managing director, and she was named one of Smart Money's Power 30, their list of the most influential people on Wall Street. She was named one of the 25 most powerful women in finance by American banker, and one of the top 50 women in wealth by wealth manager. She was appointed to serve on President George W. bush's advisory panel on tax reform, and she has been one of Schwab's leading lights as well as Wall Street's leading lights. So I'm really looking forward to my conversation with Liz Ann. So Liz Ann, you travel around a good bit and talk to a lot of people about what they feel about the world and the market. So over the past months, what are clients and investors and people just trying to figure out the world? What do they seem to feel? What are they anxious about? And what are you telling them? That is the world's biggest softball.

Liz Ann Sonders (1:48)

So only in the context of what I've experienced over the last eight years would I say that in the last month, there is maybe a modicum of more positive flavor to questions and comments that I get, but only in contrast to what has been just persistent and pervasive skepticism, pessimism, distrust, whatever adjective you want to use to describe the environment. And it's still the case, though, that, and I am on the road every week and I speak at client events all over the place. Most of the questions are maybe not quite Armageddon-like, but pretty close to it. They're all some form of what worries you now, what's the next shoe to drop, what's the next crisis, what's the next black swan, why aren't you worried about? And that's really been consistent since the financial crisis. And I think that's one of the most remarkable things about this bull market is how distrusted it's been from the gecko.

Zachary Karabell (2:45)

And do you think people then filter what's going on politically or what's going on culturally and then they apply it to markets or are they worried about markets and then they apply to politics? Or are people just, in your experience, kind of worried about everything chronically these days?

Liz Ann Sonders (3:01)

I think it's probably worried about everything chronically, but if I were to pick up the two first choices you gave me, I think it's concern about kind of the macro environment and then they apply it to politics, although I think some people would say it's the opposite. But I think mostly it's just muscle memory, not only of the severity of this most recent financial crisis, but the fact that it came within a decade of the tech bust. So for many investors, within a 10-year period of time, they had two epic bear markets, and it wasn't really a financial crisis in the case, it was a valuation crisis in the case of the first one. But at the bottom in 09, you had a 10-year look back return on the S&P of negative 3.5%.

You have to go all the way back to the depression to get a loss over a decade-long period of time to that degree. And I think that that has just stuck in people's craw. And I think we really did change the mindset, maybe even of a generation of investors, not all that different than what happened coming out of the Great Depression. And I think people are just very on guard. They don't want to get caught again in the next one, whatever that is, whenever it is. So they're very, they think they're attuned to bubbles building, crises brewing. And unfortunately for a lot of investors, it means they've missed a good part of this ride.

Zachary Karabell (4:25)

It's a good point of between the collapse of markets before 9-11 and then through 2002, cratering in October of 2002, and then again beginning to collapse in 2008 into 2009 A lot of people have said it is kind of like that Great Depression generation from 1929 to whenever, that it was well into really the 50s. You might even argue it took decades, well into the 80s before people actually treated markets with anything resembling sanguininity.