A recession may be in the distant future, but the economy looks rosy for the near term, according to Charles Schwab Investment Management.
The U.S. is in the last phase of a bull market that could extend for another 18 to 24 months, said Omar Aguilar, chief investment officer for equities at Charles Schwab Investment Management.
“Growth is still outperforming value, creating a solid, stable floor for the equity market” despite the fact that the market is not as outstanding and stable this year as it was 2017, Aguilar said during the Schwab mid-year outlook teleconference Friday.
Investors should find opportunities in the international markets, both developed and emerging, he said. “A lot of people are concerned about a potential trade war … but the fundamentals of the economy are still strong. So far, potential trade wars have had zero impact on the global economy,” he said.
Aguilar advised that technology, energy and health care are the sectors that will continue to be attractive. “Technology still has a lot of potential and e-commerce will do well in the second half of the year,” he added.
Brett Wander, chief investment officer of fixed income at Charles Schwab Investment Management warned investors against overreaching for returns and taking on too much risk because of the continuing low interest rate environment. The Federal Reserve will raise rates at least one more time this year and probably twice, making 2018 the first time in more than decade rates have been raised four times in a year, he said.
The yield curve between two and 10-year treasury rates is flattening. However, investors should resist the urge to buy into conventional wisdom that a flattening or inverted yield curve portends a recession, Wander said.
“Each market environment is unique, so traditional wisdom may not hold true,” he said. “Investors should not overreach for yield. They should stay diversified and liquid, and refrain from the temptation to pursue higher risk to get higher yields.”