US Markets

Charles Schwab's chief strategist: Expect some headwinds for stock market in 2018

Key Points
  • Liz Ann Sonders told CNBC she expects to see "bouts of pullbacks" next year.
  • Both the economy and the market are in the latter stages of the cycle, she explained.
Schwab Chief Investment Strategist, Liz Ann Sonders
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Schwab Chief Investment Strategist, Liz Ann Sonders

The bull market could continue into 2018, but investors should expect more headwinds, Charles Schwab's chief strategist Liz Ann Sonders told CNBC on Wednesday.

That's because both the economy and the market are in the latter stages of the cycle, she explained.

"You're seeing it in a lot of the economic characteristics — the pickup in capital spending, the pickup in productivity tend to be late-cycle phenomenons. The likely peaking in PMIs. That doesn't mean we're at an imminent end but it's later-cycle-type behavior," Sonders said in an interview with "Power Lunch" from the sidelines of the Schwab Impact Conference.

She also pointed to the tightening of the Federal Reserve's monetary policy and its "unprecedented" shrinking of its $4.5 trillion balance sheet. The central bank approved the reversal of its historic stimulus in October.

All of that points to a rockier 2018 for the stock market.

"I would expect to see some bouts of pullbacks," Sonders said.

Stocks have continually made new highs this year, but those highs have eased lately.

Sonders said the market has done well because of the turn in global growth and U.S. corporate earnings.

"That really represented the last year's worth of strength. But I think the liquidity environment, which has been so ample, which has been an underpinning under this entire bull market, is still ample," she said.

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