While the U.S. manufacturing economy has weakened, that weakness has not yet spilled over into the consumer economy. Sonders said that she is watching employment numbers as a leading indicator of weakness in the consumer economy, and with the labor market strong around the world, consumers are still able to support a healthy – but slow-growing – economy.
Sonders is also on watch for a decline in earnings – analyst expectations are negative for third and fourth quarter earnings.
With the mixed bags of indicators and expectations, Sonders and Schwab are neutral on U.S. large cap stocks. However, volatility may give advisors and investors opportunities to “take advantage of these swings” and open or expand positions in stocks.
But for most investors, it’s best to continue rebalancing portfolios periodically to take advantage of the different level of volatility between asset classes.
“Rebalance more frequently,” she said. “This kind of environment gives you an opportunity to rebalance… rebalancing means it’s your portfolio that’s telling you that it’s time to do something.”