Despite the fact that Liz Ann Sonders flew into Florida just this morning, she was well aware of the bearish bias of many of the macro presenters at this year's Inside ETFs conference.
While not a raging bull by any means, the chief investment strategist for Charles Schwab provided a much more measured and cautiously optimistic view of the economy and markets in her closing keynote address.
Still Cautious, But Recession Unlikely
Sonders began her presentation with a quote from famed investor Sir John Templeton, who once said that "bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”
Sonders spent much of her talk explaining why she believed that the bull market was still alive and most likely in the "mature" phase of Templeton's life cycle.
While she was cautious on the near term, she certainly didn't think the economy was in as bad shape as many believe.
"I don't want to dismiss any of the concerns out there about the global economy, but if you look at the data, it's not as bad as the doom-and-gloomers suggest," she said.
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Global leading indicators are actually picking up, according to Sonders, while U.S. leading indicators show only minor stress. These indicators, based on economic data―which suggest a 10% risk of recession―contrast with market-based indicators such as stock markets, credit spreads and the yield curve, which put the risk of recession at 50%.
Putting the two together, Sonders put the risk of a U.S. recession at 25%. In fact, "leading indicators show we probably have a ways to go before the next recession," she said.
The big question, according to Sonders, is whether the weakness in manufacturing pulls down the rest of the economy. In her view, it's won't, and the 88% of the economy that is service-related can weather the slowdown in the 12% that's tied to manufacturing.
While her talk was mostly about the United States, Sonders did mention China, about which she said she isn't particularly worried about: "We're in the soft-landing camp, not the hard-landing camp." Moreover, U.S. exports to China are minimal as a percentage of GDP, thus the risk to the U.S. economy isn't very big.