Charles Schwab Chief Investment Strategist Liz Ann Sonders continues to sound skeptical that the U.S. is entering the second leg of a “double-dip” recession.
“Although rhetoric surrounding a double-dip recession has increased throughout the summer, we remain relatively optimistic that economic growth will remain positive (albeit low) and that from a sentiment and valuation perspective, the stock market appears relatively attractive,” Sonders (along with Schwab’s Brad Sorensen and Michelle Gibley) writes in her latest market commentary on Schwab’s web site.
Sonders, Sorensen, and Gibley say that volatility will continue, but add that “alternatives to stocks are relatively unattractive,” with bond yields near all-time lows and interest rates on cash deposits at virtually zero.
Sonders and her colleagues also say bad recent housing numbers ” should be taken with a grain of salt”, skewed by the expiration of the housing tax credit. They think that “historically low mortgage rates and record affordability will help support the housing recovery — but that it will be a slow process and could bounce along the bottom for some time.”
The Schwab trio point to the yield curve and leading economic indicators as signs the U.S. is not headed into another leg downward for the economy. And they say they see a global double-dip as a “low-probability event”, with emerging market economies helping pick up the slack from more developed areas of the world that have slower growth. The strong growth in emerging markets and the below-average multiples of stocks in those areas “gives [emerging market equities] the ability to continue to outperform developed-market stocks,” Sonders and her colleagues say.