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Second Recession Will Be Avoided 'Easily': Schwab's Sonders

So far, 77 percent of the S&P 500 companies that have reported earnings exceeded expectations, which has led to lower price-to-earnings ratios. So with P/E ratios low and interest rates even lower, why aren’t stocks higher? Liz Ann Sonders, chief investment strategist at Charles Schwab, and Erik Ogard, director at Russell Investment Group, shared their insights.

“It comes down to three different things: fear, uncertainty and disbelief in the future strength of the economy,” Ogard told CNBC.

“That’s why we have the dichotomy between the market and the economic scenario.”

Ogard said investors are wary to act because they affected by the “scary” economic news, in addition to the “tempered language” for future earnings outlooks.

“So we’re going to have to earn our way out of this and it can’t be from cost-cutting—it has to be from real economic growth,” he said. “I believe we’re turning that corner right now, and we will advance...we won’t go into recession, we won’t experience deflation and eventually, we’ll work our way out of this.”

In the meantime, Sonders said the markets are in a classic “mid-cycle slowdown” and will not see a double dip.

“I don’t think we’ll look back and say it was the second historical double dip,” she said. “I think we’ll fairly easily avoid a second official recession.”

Sonders Likes:

S&P Health Care

S&P Technology

Ogard Likes:

Costco

Hewlett-Packard

Newmont Mining

Scorecard—What They Said:

  • Ogard's Previous Appearance on CNBC (Jul. 2, 2010)
  • Sonders' Previous Appearane on CNBC (Jul. 19, 2010)

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Market Views—Across the Board:

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CNBC Data Pages:

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CNBC Slideshows:

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Disclosures:

No immediate information was available for Ogard or Sonders.

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Disclaimer

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