WEBVTT - Charles Schwab's Liz Ann Sonders Talks Surging Oil Prices 

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Les Anne so Ander's chief investment strategist at Charles Schwab Lazan,

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<v Speaker 2>thanks so much for joining us here. We're kind of

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<v Speaker 2>getting into the teeth of the earnings here. We had

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<v Speaker 2>the banks, we're having some tech companies today, we've got

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<v Speaker 2>some energy companies reporting. It seems like earnings are pretty solid.

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<v Speaker 2>Is it enough to support this market?

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<v Speaker 1>Liz Well, it already has done a lot to support

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<v Speaker 1>the market, and that's because you not only have seen

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<v Speaker 1>the progression since we've been in reporting season of rising

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<v Speaker 1>estimates for the quarter, you've had big upward revisions to

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<v Speaker 1>calendar year twenty twenty six numbers. I guess the only

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<v Speaker 1>rub to that is that the boost in expectations is

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<v Speaker 1>very concentrated. So you've gotten a boost for calendar year

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<v Speaker 1>twenty six from the energy sector, but tech is really

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<v Speaker 1>where the story has been. And I guess the only problem,

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<v Speaker 1>if you had to nitpick this smoove higher, is that

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<v Speaker 1>there's con centration in terms of that tech earnings increase,

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<v Speaker 1>largely driven by Broadcom, Micron and then the SEMIS. If

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<v Speaker 1>you're going to go at the industry level, so a

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<v Speaker 1>little bit of narrowness.

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<v Speaker 3>Do you want to see more breath though in the

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<v Speaker 3>rally in the market rallies that we've been seeing, Lazan, Yeah.

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<v Speaker 1>So you know, in a normal course of a corrective phase,

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<v Speaker 1>you go through the correction, then you have a relief rally.

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<v Speaker 1>If that doesn't have a big breath thrust, you often

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<v Speaker 1>retest and then move higher again. We didn't quite get

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<v Speaker 1>the breath thrust. So SMP sitting at an all time

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<v Speaker 1>high right now, but only seven percent of the index

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<v Speaker 1>members are at fifty two week highs, and it's only

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<v Speaker 1>fifteen percent of the index that's even just at a

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<v Speaker 1>four week high. So we're again we're developing a little

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<v Speaker 1>bit of that concentration problem, and it would be a

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<v Speaker 1>better backdrop for the market medium to longer term if

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<v Speaker 1>we had some better breath not yet, Lezan.

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<v Speaker 2>I guess late last year, maybe October November, we started

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<v Speaker 2>to see a little bit of a rotation in the

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<v Speaker 2>market out of some of those multiple growth tech names

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<v Speaker 2>into some more value maybe smaller MidCap as well. Was

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<v Speaker 2>that just a short term trade or does that have

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<v Speaker 2>some legs? Do you think?

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<v Speaker 1>I think rotation has some legs, And we've been seeing

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<v Speaker 1>that in earnest going back to last summer, the recent

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<v Speaker 1>the latter part of the rally that we have recently

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<v Speaker 1>had was concentrated actually back in some of those you know,

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<v Speaker 1>fan favorites from the twenty twenty one periods, so the

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<v Speaker 1>meme stocks and heavily shorted stocks, retail favorites, quantum computing.

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<v Speaker 1>That's given back a little bit more recently. But I

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<v Speaker 1>think these rapid fire rotations is the name of the game.

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<v Speaker 1>It helps to explain why even though at the index level,

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<v Speaker 1>the S and P five hundred did not have a

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<v Speaker 1>full ten percent correction from a maximum drawdown standpoint, the

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<v Speaker 1>average member within the SMP has had a draw down

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<v Speaker 1>of twenty percent. That is bear market level. It's just

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<v Speaker 1>happened through churn and rotation, not all at once.

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<v Speaker 3>Lazane, you like GARP as an investment strategy, growth at

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<v Speaker 3>a reasonable price. What's a reasonable price right now? And

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<v Speaker 3>what do you like because you look at some of

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<v Speaker 3>these tech companies, Google, Alphabet's Google. You know now at

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<v Speaker 3>pe of twenty nine? Is that fair? Is that rich?

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<v Speaker 3>How do you view it?

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<v Speaker 1>Well? I look at the market from an overall valuation perspective,

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<v Speaker 1>not necessarily at the individual stock level, because that's not

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<v Speaker 1>what I do. Multiples actually have improved since last summer

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<v Speaker 1>when there was really really heightened concern about lofty multiples,

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<v Speaker 1>and that's because even though we've had this rotation and churn,

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<v Speaker 1>forward earnings estimates have continued to rise. So you got

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<v Speaker 1>the boost to the denominator and the pequation helping bring

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<v Speaker 1>multiples down to a degree. But we're big believers in

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<v Speaker 1>factor based investing, more so even than second based investing,

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<v Speaker 1>or at least applying factors as an overlay to more

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<v Speaker 1>monolithic sector work. And the factors that I think make

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<v Speaker 1>sense here are Garpian nature. You want to look for

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<v Speaker 1>forward earnings growth, you want to look for stability and

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<v Speaker 1>or growth in profit margins, but you want to be

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<v Speaker 1>mindful of not paying exorbitant valuation. So that brings sort

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<v Speaker 1>of the Garb wrapper in when talking about the factors

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<v Speaker 1>of focus for us.

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<v Speaker 2>Lauzanne amid all the geopolitical issues that investors are dealing

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<v Speaker 2>with and the earnings this week, we also had a

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<v Speaker 2>FED meeting this week, and we have a little bit

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<v Speaker 2>of a changing of the guard here. I'd love to

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<v Speaker 2>just get your thoughts on kind of what's happening at

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<v Speaker 2>the Federal Reserve and how that's impacting, if at all

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<v Speaker 2>your outlook here.

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<v Speaker 1>Yeah, so I personally had a little bit of a

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<v Speaker 1>lean toward Powell deciding to stay on. So not a

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<v Speaker 1>massive surprise there, I think, And you know, he well

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<v Speaker 1>stated that until the investigations are truly sort of dead

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<v Speaker 1>and buried, he felt he should stay on. What's also

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<v Speaker 1>interesting about what what happened with the transition is a

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<v Speaker 1>lot of people don't realize that Worsh isn't coming in

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<v Speaker 1>to replace Powell as governor. Worsh replaces Stephen Myron as governor,

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<v Speaker 1>and then we assume gets voted by the FMC into

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<v Speaker 1>the chair position. With Powell staying on, it means that

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<v Speaker 1>the administration or President Trump cannot appoint another governor who

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<v Speaker 1>might be either he could have reappointed tried to reappoint

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<v Speaker 1>Stephen Myron, he would have had to go through another

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<v Speaker 1>confirmation hearing. But what I think is going to be

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<v Speaker 1>most interesting is what does Kevin Worsh change. Does he

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<v Speaker 1>do fewer meetings? Does he not have press conferences after

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<v Speaker 1>every meeting? Are there fewer speakers out there among FED

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<v Speaker 1>members that could have some market impact because we're so

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<v Speaker 1>used to getting just a regular stream of information via

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<v Speaker 1>press conferences, via what I've often joked being the Federal

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<v Speaker 1>Open Mouth Committee. I don't say that in a derogatory way.

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<v Speaker 1>There's just lots of voices out there.

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<v Speaker 3>Hey, Lizen, wanted to get your thoughts on some of

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<v Speaker 3>the ECO data we got this week. You say GDP,

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<v Speaker 3>the headline GDP number of two percent for the first

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<v Speaker 3>quarter doesn't really tell the whole story.

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<v Speaker 1>Why, Well, so you got a jump. You actually had

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<v Speaker 1>a big jump in both imports and exports. The net

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<v Speaker 1>of those two things actually was a slight drag on GDP.

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<v Speaker 1>But what was interesting is that the reason why exports

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<v Speaker 1>jumped had a lot to do with the war and energy,

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<v Speaker 1>but the reason why imports jump had more to do

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<v Speaker 1>with a little bit less terrif uncertainty as it related

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<v Speaker 1>to the Supreme Court ruling. You did see a boost

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<v Speaker 1>to CAPEX. There's still a bit of a bias in

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<v Speaker 1>the CAPEC story to AI, but we're starting to see

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<v Speaker 1>a little bit of a broadening out and then not

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<v Speaker 1>much strength on the consumer side. And I have a

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<v Speaker 1>longer term view that I think I think we could

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<v Speaker 1>see the consumption part of the economy, which is now

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<v Speaker 1>sixty nine percent of GDP, actually slowly trend down. And

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<v Speaker 1>what will catch up a little bit, not in direct

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<v Speaker 1>percentage relative terms, is the business investment spending side of things.

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<v Speaker 1>I think that's going to be a longer term driver

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<v Speaker 1>of the economy than it's been in the past.

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<v Speaker 2>Zan, thank you so much for joining us. We always

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<v Speaker 2>appreciate gating a few minutes of your time. Lysiane Sanders,

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<v Speaker 2>chief investment strategist at Charles Schwap.

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<v Speaker 1>There