Thursday, July 25, 2024
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Schwab’s Liz Ann Sonders: Bond market currently leading the way for equity market

As we approach the midpoint of the year, investors are eagerly watching to see where the market will go from here. With the 100th trading day of the year behind us and a 10% year-to-date increase, there is speculation about how the rest of the year will unfold. Charles Schwab’s Chief Investment Strategist, Lizanne Saunders, sheds some light on the current market trends and what they may indicate for the future.

Saunders points out that while the overall market may be up, there is a significant amount of volatility and rotation happening beneath the surface. The average member of the S&P 500 has experienced a 14% drawdown, with some sectors seeing even larger declines. This churn and rotation in the market are telling a more accurate story of the current relationship between the market and macro uncertainties.

One of the key factors influencing the market right now is the bond market. Bond yields have a direct inverse relationship with equities, particularly impacting smaller companies. As yields fluctuate, so too does the performance of different sectors within the market. This relationship is crucial for understanding the current leadership dynamics in the market.

One theme that has emerged as a potential market leader is artificial intelligence (AI). Companies in the tech, communication services, and consumer discretionary sectors are leveraging AI to drive productivity and earnings growth. While some sectors, like utilities, may seem like an odd choice for leadership, their focus on AI and innovation is what is driving their success.

Overall, the market is in a state of flux, with various factors influencing its direction. As we navigate through the rest of the year, it will be essential to keep a close eye on the bond market, sector rotation, and emerging themes like AI to understand where the market may be headed next.



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