Liz Ann Sonders Says There is No Stock Bubble; Comments on Yellen

By on November 14, 2013

Liz Ann Sonders - Charles SchwabLiz Ann Sonders, chief investment strategist at Charles Schwab Corp., David Zervos, chief market strategist at Jeffries, and Michael Hanson, senior U. S. economist at Bank of America discussed the Yellen Fed and her possible impact on the U.S. stock and bond markets. They spoke with Trish Regan and Adam Johnson on Bloomberg Television’s “Street Smart.”

Hanson doesn’t see a risk of inflation exceeding the Fed’s 2% target range as its been stuck around one percent. Until the Fed sees 2.5 to 3 percent GDP growth they are going to be cautious pulling back on accommodation, Hanson added.

Sonders discounted the notion that the market was on a “sugar high” from Fed stimulus. She said earnings were improving, the market was climbing a “wall of worry,” along with sentiment and technicals supporting the move.

Zervos said Bernanke and Yellen would never let deflation into the economy so the only risk investors need to hedge is inflation. The idea that we will get out of “the greatest monetary experiment in history” without making a mistake is the challenge for investors, according to Zervos.

Hanson said there won’t be a fiscal drag on next year’s economic growth which amounted to $200 billion in 2013 and cut growth by one percent by some estimates. This, along with other factors as mentioned by Hanson, should support higher economic growth next year.

Sonders commented at length on the housing market and the impact of “real” mortgage interest rates. Sonders continues to expect the trend of improving housing prices to be supported by fundamental improvements while giving consideration to local market trends.

Sonders is neutral on financials with regional banks looking better in her view.

According to Sonders we’re not in a stock bubble. Regarding Shiller’s CAPE, she said there are some faults to it. Sonders said with stocks trading at their mean PE, in a bull market they tend to blow through this to the upside.

For 2014, Sonders expects 9 percent earnings growth (S&P 500 earnings of $120) with inflation remaining low which could lead to a 17 PE. This would put the S&P 500 over 2,000. Sonders sees risk in a stock market melt-up which could end badly.

Back in April, Sonders scoffed at demographic concerns [link].


  1. Jim Dandy to the Rescue

    November 15, 2013 at 5:11 am

    Liz will be right until she’s wrong. She looks about the same as back in the day. Back thar n over yonder. Another fed influence denier. Of course the low rate policy is juicing stocks. But the fed can justify this to fight deflation. Would end up like japan with stocks down 80 % otherwise. Still might when boomers start using their walking canes.

    • New Low Observer

      November 16, 2013 at 2:42 pm

      The Fed’s QE program and expansion of the balance sheet is THE cause of the current deflation in gold and other commodities. Once QE ends, the price of gold and other commodities will skyrocket.

      According to Scott Sumner in an EconTalk interview (Sumner on Money, Business Cycles, and Monetary Policy):

      “…the countries that have the most inflationary policies today, like Australia for instance, have the smallest amount of money printing going on. And the ones that have the most deflationary policies, like Japan, have the largest amount of money printing (source:”

      According to Steve Hanke in an EconTalk interview titled “Hanke on Hyperinflation, Monetary Policy, and Debt”:

      “…if you look at a trend line since 2009 and look at the endpoint today of the trend line as you are going left to right, that point is about 7.5% higher than the actual level of the money supply that we have. So, you could argue that relative to trend we’ve got a deficiency of about 7.5% in broad money (source:”

      The indications from the two cited sources suggest that the Fed’s expanding balance sheet has proven to further precipitate deflation and is actually the opposite of loose monetary policy.


  2. Leigh Hung, Major

    November 16, 2013 at 1:51 pm

    I agree. I would begin by making vigorous and passionate love to Sonders. After 4-6 minutes I would revert to gentle lovemaking, with soft caresses. Then I would revert back to vigorous and passionate lovemaking. That would continue for 2-3 minutes, after which, I would slap her.

  3. Marathon Man

    November 18, 2013 at 3:08 pm

    There’s no denying she is hot. And smart too. No dumb blond that one. I’d like to take her for a run around the block.

  4. Zerobagger

    March 23, 2014 at 12:53 pm

    I’m working on my taxes and just entered my 1099 info and getting steamed yet again. This fed policy of paying us peons pennies to stoke the stocks of the 1% is a horrifying injustice and impoverishing millions of retirees. We 99% must rise up and take what is rightfully ours!

  5. Philosophical Economist

    March 25, 2014 at 4:27 am

    Zerobagger, savers do not have a right to get paid to sit on risk-free bank deposits. When the economy is overheating, the Fed may choose to create an interest rate environment that rewards them for sitting on bank deposits rather than spending and investing and making the overheat worse. But this reward is not a right, just like the reward of a low borrowing cost that the Fed sometimes affords to those that do choose to spend and invest, when economic conditions call for it, is not a right.

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