Headline Indices Are Masking Market Stress | Liz Ann Sonders on the Case For Quality Stocks During An Oil Shock
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Today's episode is brought to you by Pictet Asset Management and their AI enhanced ETF range, ticker PQNT and PQUS. You'll hear more about how they're using AI to enhance equity exposure later in the show. For now, let's get into it. Very pleased today to be joined by Liz Ann Saunders, chief investment strategist at Charles Schwab. Liz Ann, so great to see you. Welcome to Monetary Matters.
Nice to see you. I always love our conversations. Thank you.
Liz Ann, you write recently that the 2026 period presents one of the most analytically rich internal market environments in many years, in part because headline indices are obscuring rather than revealing underlying stress. What is the stress you were referring to there, and how might it be obscured by the headline indices?
Let's just put some numbers on it first and then I can talk about the why. So you've had, as you and I are taping this right now, we've had at the index level, the S and P's maximum drawdown so far year to date is 7%. So not not not getting really close to correction territory. It's a little bit bigger for the Nasdaq at the index level. The maximum drawdown has been 9%. But under the surface, it's where it gets more interesting. So if you look at the average member level maximum drawdown, so you go through, you know, all the stocks in the S and P, look at what their individual maximum drawdown
And we'll get to into the war and the impact on oil prices quite quickly. But, you know, Lizanne, if if I had run into you at a at a conference maybe in November and December and we we both knew that there would be an oil shock in the first quarter of this year, perhaps I might have speculated that the S and P would have been down more. The thinking being, okay. You know, companies that aren't in the energy sector are probably gonna be a little bit challenged. And even though the energy sector, you know, lives poised to do great with oil at a 100 or perhaps even higher, you know, the oil secto
Well, I don't know that I would have speculated that we would have a bear market as a result of some sort of military conflict and a spike in oil prices. I think probably the conversation would have continued on in terms of what what the the actual mechanics were around the conflict, what the longevity of a move higher in oil prices. Where we sit right now, yes, I am a bit surprised that the market hasn't suffered a little bit more. But what it may be reflecting is that there's pockets not just in the market, but also in the economy that are no one's immune, no industry, no company, no individ
If the price of oil stays at a $100, WTI is a bit lower, but your Brent is at a $100. If it stays around there, what do you think the impact will be on the economy, on the market, and how will it be the transmission channel? Will it be that companies themselves like United Delta Airlines companies, you know, they they are feeling the pinch? Or is it that consumer sentiment and consumer, savings and and therefore spending is sapped by higher oil prices and then through kind of a macro channel that
You know, I mean, I'd say to all of your, you know, possibilities, examples, the answer to all of them is yes. You know, that is that is the feeder mechanism. I think in terms of global impact, there are unquestionably pockets of the global economy that are more directly and quickly impacted by the lack of oil getting through the Strait Of Hormuz, many Asian nations being a big part of that. You also see that reflected in the still fairly widespread between Brent crude oil prices and WTI prices, WTI being the domesti
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