Tags: Sonders | Bears | Bond | Market | Stocks

Sonders: Bears in Bond Market Will Push Stocks Higher

Friday, 16 Apr 2010 09:42 AM

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Investors can look forward to the market continuing its upward rise, says Charles Schwab's chief investment strategist Liz Ann Sonders.

Some losses in the near term will not prevent the market from continuing its rally, she says.

“I think the base case is for more of grinding higher versus the straight shot up that we saw since last March,” Sonders says.

Sonders recently told Yahoo Finance Tech Ticker that her outlook for the market is positive because investors remain wary of the value of stocks.

“The wall of worry is still very much intact,” she said.

Investors could pull out of bonds and place their money back into stocks in the near term, resulting in a “melt- up” in equities, Sonders said.

“In the event we continue to see a tick up in the long end of the yield curve, you're going start to get some significant hits on the bond side,” she said.

Randy Frederick, director of trading and derivatives at Charles Schwab, said when interest rates start to rise, retail investors will start heading back to stocks, the Wall Street Journal reported.

“There are a lot of people talking about the imminent bear market in bonds coming,” he said.

Interest rates may need to rise to boost an economic recovery, said James DeMasi, chief fixed-income strategist at the Baltimore unit of Stifel Nicolaus & Co.

“The data continue to tell you that we are on the borders of a sustainable economic recovery. Jobs growth remains the last piece of the puzzle. Real interest rates are too low in the context of a growing economy so rates should move higher if this economic growth has legs,” he said.

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