OM DENNE EPISODE
This week on The Master Investor Podcast, Wilfred Frost sits down with Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, which oversees $13.4 trillion in client assets.
Liz Ann begins with the surge in global bond yields and the growing tension between Treasury Secretary Scott Bessent and the Federal Reserve. She argues that rising yields don't necessarily spell trouble for equities - provided the move remains orderly - and highlights 5% on the US 10-year Treasury as an important level to watch.
She believes that Kevin Warsh and the Fed will have more impact than Scott Bessent and the Treasury, and ultimately believes Warsh, who she knows personally, is still a hawk at heart wanting to limit inflation, and expects a rate hike soon. She also examines what history tells us about equity-market performance during Fed hiking cycles, arguing that the key question is whether the Fed takes the "escalator or the elevator" approach to raising rates.
The conversation then turns to the AI trade and the growing concentration of earnings growth among a small group of mega-cap companies. Liz Ann warns of a coming inflection point, which still accounts for a disproportionately large share of overall SP500 earnings growth, and thus carry significant risk, but points to the significant opportunities in the market broadening out, which has already begun to happen.
Ultimately, Liz Ann believes there is plenty of opportunity still in US equities and warns against trying to time the market in the short term.
0:00 Intro 3:20 Rising yields on stocks 5:45 Speed of rise key 7:32 Stock v Bond correlations 11:40 Fed beats Treasury 17:20 Warsh will hike 22:05 Growth is key & at risk 26:58 AI earnings growth peaking? 31:32 Mag7 earnings concentration 35:15 SP500 valuations 37:50 Mag7 already underperforming 41:20 More rotation to come 44:00 Mid terms 46:30 Wealth effect impact 50:01 Still constructive equities LT
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