In this episode of Excess Returns, we welcome back Liz Ann Sonders, Chief Investment Strategist
at Charles Schwab, for an in-depth conversation about what's really driving markets right now.
Drawing on her latest research and commentary, we dig into retail trading dynamics, the implications of rising
tariffs, the debt burden, inflation pressures, market concentration, and why the Fed might be holding the line.
Liz Ann delivers clear, actionable insights—cutting through the noise and helping investors understand
what matters most in today’s unstable environment.
00:00 – Opening clip: debt, growth, inflation & the Fed
01:00 – Welcome and introduction
02:00 – Retail trader impact on market rally since April
05:25 – Sentiment washout and pain trade dynamics
08:00 – Policy instability and tariff complacency
12:00 – What investors can do in the face of uncertainty
14:50 – Budget deficits, debt burden, and growth implications
18:00 – Inflationary risks embedded in the new spending bill
20:30 – Dissecting inflation: tariffs, goods vs. services, and inequality
23:45 – Inflation vs. margins: where the impact shows first
26:00 – Instability vs. uncertainty: the new investor reality
30:30 – Labor market risks and misleading employment metrics
35:00 – Immigration's hidden macroeconomic effects
38:00 – Fed independence, Powell’s job security, and mispriced rate expectations
42:00 – Why the Fed may not cut—and why that’s bullish
44:20 – Mag 7 myth: contribution vs. true performance
48:00 – Broadening the rally: high-quality vs. low-quality stocks
50:30 – AI's second-order effects and sector-level surprises
55:00 – Liz Ann’s contrarian take: why year-end targets are pointless
https://www.youtube.com/watch?v=Lcq0Mux3oC8 
Comments
Here is 2025 best performing stocks in S&P 500, and they are not the Magnificat 7.
https://slickcharts.com/sp500/performance
Edits:. She stated that the tariff will either be absorbed by the import companies or the consumers. Companies will NOT lower their own earnings for this administration and will pass on this added cost to the consumers as history has shown over and over. Question is when it will show up this year?
Thanks for the list of highest-returning stocks YTD.
I wasn't paying close attention to stocks with the highest 2025 returns—the results surprised me.
The two Mag 7 stocks with the highest returns/rankings are:
Nvidia (29.20% - 48th)
Microsoft (21.88% - 86th)
@WABAC,
I haven't done a deep dive on Seagate Technology.
But a quick search indicated there was robust growth for storage in data centers running AI workloads.
Seagate's rival, Western Digital, ranked 13th on the list with a 52.69% return YTD.
Forbes reports that industry shipments were still down 9.5 for the 1st quarter of 2025.
My own usage was actually quite good, despite having desktop computers, big TVs and surround sound systems on very frequently. I assume it was because our HVAC and appliances and windows are all pretty efficient. Still, it always surprised me.
Sonders is STILL smart and gorgeous. I listened.
Meanwhile the EU tariff announcement is met with no enthusiasm. And the Japan deal was simply an ordinary up day on the market. Canada is not kowtowing, nor is Mexico and I expect the China results to be met with little enthusiasm.
Any FOMO that I may have felt in the last month, or so, is diminishing quickly.
So when FOMO fizzles out, what next for these markets? What is driving this bull?
Maybe DJT Bull ?
This bull market has overcome a lot thus far in 2025. Retail investors have been contributing greatly to the slow march northward, if I can believe what I read online. FOMO has been key. Now valuations are stretched, complacency abounds and the bears have been beaten down.
If there is a cliff out there, we can't see it in all this fog (and manure?).
"Analysts are hinting this morning that E.U. officials appear to have pulled the wool over Trump’s eyes in the negotiations. The deal includes $750 billion in “strategic purchases,” $600 billion of private investment, and “vast quantities” of military equipment purchases. But there is near unanimity on Wall Street that the private investment was going to happen anyway in the normal course of business.
“The $600bn represents existing investment plans, not new investment,” Mark Wall and his team at Deutsche Bank wrote this morning."
And the deals may well be deemed invalid. I wonder if the government will be required to pay back any tariffs collected?
"The high court is packed with Trump’s own picks, of course, so he can expect a sympathetic hearing. It would nonetheless be a huge leap for the justices to agree that routine trade deficits constitute a national emergency."
Everyone has seen this rebranding in their own life. For example, an employee keeps asking his boss to consider a new idea he had. The boss ignores him but, six months later, jumps in with the same idea at a manager's meeting. The employee gets the work; the manager gets the credit. etc.
Nothing else matters past the best talking point and the timing of the formulation of the memory.
That's good! Now more than ever, seems like.
HY is not cheap here.
It's been a nice ride. A pullback would be healthy after such a run.
Of talking points I am sick of them. From every direction. Robotic regurgitation of what somebody trained them to say and how to say it. Give me a John McCain or a Barney Frank.
Of Sonders … She comes across as very bright and well informed. Amazing to think that she dates back to the Louis Rukeyser days. Must have been a mere teen at the time.
She was a regular panelist on Wall $treet Week with Louis Rukeyser.
* 02/2019: Market may be ignoring risks of an earnings slowdown (https://www.kbzk.com/cnn-business-consumer/2019/02/13/market-may-be-ignoring-risks-of-an-earnings-slowdown/)
Reality: the SP500 made 31.2%
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06/2020: In her 2020 Mid-Year Outlook, Liz Ann Sonders, Chief Investment Strategist at Charles Schwab offers a word of caution for the short-term but strikes an optimistic tone for long-term economic progress.
It is safe to expect elevated volatility through the remainder of the year as economic numbers remain depressed while the newly kickstarted economy may sputter with a second wave of coronavirus outbreak.
However, this pessimism is balanced with potential economic surprises and continued advances in treatments and vaccines for the virus. (link).
Reality: The SP500 made 24% during 06-12 of 2020.
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03/2022 (link)
Actions in stocks: The actions: Particularly during times of uncertainty, diversification across—and within—asset classes and sectors is of paramount importance. Given the expectation of continued bouts of volatility, especially at the sector level, resist the temptation to try to predict sector leadership and instead focus on shoring up your stock portfolio’s quality characteristics.
Actions in bonds: As central banks adopt tighter policies and yields move higher, consider looking for potential opportunities to add to your intermediate- and long-term bond holdings.
In particular, a bond ladder—in which you buy bonds with staggered maturities and reinvest the proceeds in new bonds as each one comes due—can be an effective way to increase the yields in your portfolio over time.
Reality: She missed it all. Bonds had one of the worst year in decades and stocks were in bear market.
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12/2022 (https://www.businessinsider.com/charles-schwab-liz-ann-sonders-invest-markets-stocks-recession-book-2022-12)
Reality: Her narratives were pretty weak. You didn't have to do anything special. The SP500 made 26.2% in 2023.
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12/2023: The stock market probably has an okay year if we get more stability and less uncertainty with regard to monetary policy and, in turn, inflation and interest rates.
(link).
Reality: The SP500 made more than OK, 24.9%
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I can summarize her narrative over the past several years like this:
Valuations are high
Markets carry risk
Stick with good companies
I have no idea what the market will do, but it’ll be fine
(After all, since 1980, the S&P 500 has been positive about 80% of the time.)
I'm a Chief Investment Strategist, but since I’m an economist, I’ll mostly focus on the economy — even though it doesn’t have a strong correlation to how stocks or asset categories perform over the next 3, 6, or 9 months… which is exactly what most investors care about..