The Bear Market No One Sees | Liz Ann Sonders on the Real Story Indexes Hide

Liz Ann Sonders of Schwab joins Excess Returns to break down how war, an oil shock, and shifting market dynamics are reshaping the investing landscape. She explains why the surface-level strength in markets is misleading, what’s really happening beneath the index, and how investors should think about inflation, the Fed, AI, and the evolving role of retail traders.Follow Liz Ann on Twitterhttps://twitter.com/LizAnnSondersLiz Ann's Research and Commentaryhttps://www.schwab.com/learn/author/liz-ann-sondersTopics CoveredHow war and oil shocks are impacting markets, inflation, and Fed policyWhy the US being a “net energy exporter” doesn’t protect investorsThe hidden bear market beneath index-level resilienceRotation vs. correction and what it means for portfoliosThe rise of retail traders and the shift away from “dumb money”Why better or worse data matters more than good or bad dataThe K-shaped economy and its impact on consumption and marketsAI’s three phases and its real impact on jobs and productivityWhy this earnings season may be more important than usualThe shifting role of the Mag 7 and broader market participationWhy the bond market may be the true driver of equitiesRisks in credit markets and what investors should watchLabor market dynamics and challenges for younger workersHow investors and young professionals should think about AITimestamps00:00 Intro and current market environment04:05 Why the US isn’t immune to oil price shocks05:35 Lessons from past oil shocks and inflation07:22 Why markets seem resilient despite macro risks08:00 The hidden drawdowns beneath the index surface10:13 Rolling recessions and sector-level weakness10:37 Are investors conditioned to buy every dip12:58 What happens when the dip doesn’t get bought14:36 Valuations, corrections, and market structure15:12 Sentiment analysis in a new market regime18:50 Retail investors outperforming institutions20:08 Better or worse vs good or bad economic data23:00 How markets anticipate economic turning points25:22 Understanding the K-shaped economy28:00 Wealth effects and risks from equity declines29:09 AI as a transformative force vs macro risks30:00 The three phases of AI development33:04 Why this earnings season matters more34:00 Earnings revisions and sector concentration36:00 The future of Mag 7 leadership vs the rest of the market38:00 Contribution vs performance in index returns40:00 Sector sensitivity to inflation and supply chains42:00 Fundamentals vs speculation in small caps44:21 The Fed’s dilemma in an oil shock environment48:00 Why the bond market is driving equities50:05 Credit markets and systemic risk signals53:26 Lessons from past bond market dislocations54:19 Labor market challenges and younger workers57:00 Career advice in the age of AI59:26 How Liz Ann uses AI in her research process01:01:00 Closing thoughts and where to follow Liz Ann