Bloomberg Talks: Schwab's Liz Ann Sonders Talks Earnings, Macro Environment

Date: December 12, 2025
Guest: Liz Ann Sonders, Chief Investment Strategist at Charles Schwab
Host: Bloomberg (various hosts & co-hosts)

Episode Overview

This episode features an in-depth conversation with Liz Ann Sonders, Chief Investment Strategist at Charles Schwab. The discussion centers on the Federal Reserve's recent actions, the uncertain macroeconomic environment, the earnings trajectory across market cohorts, and the search for value and growth opportunities in U.S. equities as 2026 approaches. Sonders provides nuanced takes on Federal Reserve independence, shifting stock market dynamics, and actionable advice for investors in the current climate.

Key Discussion Points & Insights

1. Federal Reserve’s Recent Action & Future Outlook

• Fed’s Latest Cut:

  • Consensus expectations were met; described as a "hawkish cut" with no promises for future easing.
  • Increasing dissents within the Fed seen as “a good thing”—signals the diversity of views and reinforces Fed independence.
  • Memorable quote:

    "It's a reminder that the C in FOMC is committee, not chair."
    —Liz Ann Sonders [01:28]

• Fed's Path in 2026:

  • The outlook remains highly data-dependent, especially with gaps in government-released economic data due to the recent government shutdown.
  • Labor market remains the key driver for Fed decisions.
  • Important nuance: more rate cuts could indicate labor market deterioration, which would not necessarily be positive for markets.
  • Notable explanation:

    "You could have a scenario where they cut more than the one or two that is priced into expectations. I'm not sure that that's universally a positive thing if it comes because of serious deterioration in the labor market."
    —Liz Ann Sonders [02:35]

2. Current and Evolving Earnings Environment

• Surprising Strength of Recent Earnings:

  • Third quarter earnings outperformed expectations, contributing to market strength.

• Sector Rotation and ‘Broadening Out’:

  • Recent data show the market leadership expanding beyond the well-known AI/mega-cap cohort ("Magnificent 7").
  • Only 17% of S&P 500 constituents outperformed the index over the last six months; that rose to 54% last month—a sign of broadening participation.
  • Quote on relative performance:

    "Better or worse matters more than good or bad. And it's that better in the case of the rest of the market...That has been a support for this broadening out and I think that has legs in 2026."
    —Liz Ann Sonders [03:44]

3. Hunting for Value: Where Are the Opportunities?

• Valuations and Rotation:

  • Despite headline index gains, many constituents have suffered significant drawdowns; this internal churn creates value opportunities beneath the surface.
  • Specific data points:
    • S&P 500 up 38% since April 8, but average member experienced a 19% max drawdown.
    • Nasdaq up 55% over the same period, but average member had a 40% drawdown.
  • Strategic advice: Look for value not in sweeping sectors, but by diving beneath index performance to find the right mix of value and growth.
  • Key concept revived: GARP (Growth At a Reasonable Price).

• Memorable quote on finding value:

  "With all this churn and rotation under the surface, that's where value is being found. This is an environment...very garpy in terms of the factors we think you want to focus on."
  —Liz Ann Sonders [05:17]

4. Factor Investing: What Works Now?

• Growth vs. Value, Profitability:
  • Growth-oriented factors are working, but selectively.
  • In small caps (Russell 2000): Non-profitable companies have outperformed profitable ones by more than double YTD, a trend Sonders would bet against ("fade").
  • Preference for "quality" within value: Strong balance sheets, high interest coverage, positive earnings trends & upward revisions.
  • Quote on quality vs. speculation:

    "I would absolutely fade that lower quality unprofitable cohort within the Russell 2000 and lean into the profitability piece where you have better fundamentals..."
    —Liz Ann Sonders [06:00]

  • Bottom line: Seek both value and growth, backed by strong fundamentals.

Memorable Quotes & Moments (with Timestamps)

• On Fed as a Committee:

  "It's a reminder that the C in FOMC is committee, not chair."
  [01:28]

• On More Rate Cuts Not Being All Good:

  "I'm not sure that that's universally a positive thing if it comes because of serious deterioration in the labor market."
  [02:35]

• On Market Breadth:

  "Better or worse matters more than good or bad."
  [03:44]

• On Market Value Opportunities:

  "With all this churn and rotation under the surface, that's where value is being found."
  [05:17]

• On Small Cap Quality:

  "I would absolutely fade that lower quality unprofitable cohort within the Russell 2000 and lean into the profitability piece where you have better fundamentals..."
  [06:00]

Notable Segments & Timestamps

• [00:34] Start of Liz Ann Sonders segment
• [00:51–02:57] Fed actions, independence, and labor market importance
• [02:57–03:44] Earnings environment, market breadth, and sector rotation
• [04:23–05:31] Where to find value given lofty valuations, cap-weighted index distortions
• [05:31–06:39] Factor-based investing, the case for profitable small caps, and the synthesis of growth and value approaches

Summary

Liz Ann Sonders brings a big-picture, data-driven mentality to analyzing today’s markets. She emphasizes the importance of watching the labor market for clues on the Fed’s path, cautions against blindly following index performance due to hidden volatility underneath, and encourages investors to favor both value and growth, especially where profitability and strong fundamentals are present. Her pragmatic, nuanced take delivers timely guidance for those navigating a complex investment landscape in 2026.