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The US economy is in a "rolling recession" and a full-blown downturn looms, Liz Ann Sonders says. Charles Schwab's chief investment strategist doesn't expect a bunch of interest—rate cuts in 2024. "The leading indicators have absolutely imploded," Liz Ann Sonders, the chief investment strategist at Charles Schwab, said during a recent episode of "The Meb Faber Show." "We've never seen this kind of deterioration in leading indicators" outside of an ongoing recession, she added. Sonders was referring to The Conference Board's Leading Economic Indicators (LEI), which fell for a 16th straight month in July.
Persons: Liz Ann Sonders, Charles Schwab's, doesn't, Charles Schwab, Faber, We've, Sonders, that's, it's Organizations: Service, shouldn't, Conference, Federal Reserve, Avatar Associates Locations: Wall, Silicon
In a client note, Faber said he likes US value and international value stocks. A few exchange-traded funds that offer exposure to value stocks include the Vanguard Value ETF (VTV), the iShares Russell Mid-Cap Value ETF (IWS), and the Dimensional US Marketwide Value ETF (DFUV). But an arguably better opportunity lies outside of the US stock market in international value stocks, he said. But the discrepancy, like in the US, between international value stocks and all other international stocks is also at "historically wide levels," Faber said. Cambria FundsInvestors can gain exposure to international value stocks through funds like the iShares MSCI EAFE Value ETF (EFV), the Avantis International Large Cap Value ETF (AVIV), and the Dimensional International Value ETF (DFIV).
Persons: Meb Faber, Faber, Cambria Investment Management's Meb Faber, Russell, Faber's, they're Organizations: Nvidia, Cambria Investment, Morningstar, Vanguard Value, Value Locations: GuruFocus, Cambria
Right now though, the market has never been more top-heavy and the share of market constituents outperforming the broader index has never been lower. According to Ed Clissold at Ned Davis Research, the percentage of stocks outperforming the S&P 500 this year is just 24.5%. The percentage of S&P 500 stocks outperforming the index on a rolling three-month basis is just 20.3%, a record low. Clissold says that the S&P 500's one-year gain after periods of relative strength by a small group of large caps is an average 1.8%. These five stocks account for over a quarter of the S&P 500's $36.78 trillion market cap, and the top 10 account for a third of the total.
Persons: bode, Ed Clissold, Ned Davis, Meb Faber, Chuck Prince's, Cambria's Faber, Jamie McGeever, Andrea Ricci Organizations: NYSE, Barclays, Apple, Microsoft, Nvidia, Ned Davis Research, Reuters, Google, Cambria Investment Management, Citigroup, Thomson Locations: ORLANDO, Florida
The economist continued: "And it's not the level of the unemployment rate that matters as far as the economic cycle is concerned — it's the change in the unemployment rate. He told Insider in a recent interview that investors should target value stocks and foreign equities, specifically Chinese stocks and those in emerging markets. For most of the past decade, value stocks were unloved while growth names went on an explosive rally. But now value stocks have made a major comeback, while growth picks have melted down. When picking stocks, Faber said he's especially interested in two qualities: a stock's valuation and momentum.
Meb Faber of Cambria Investments called a market downturn this year, and says it could get worse. Although Meb Faber foresaw the stock market meltdown this year, he says the worst may be yet to come. "I don't think stocks are going to crash 50%, but you at least have to hold that thought in your head," he told Insider in an interview. "The stock market in our opinion is still expensive." After a decade of leadership for tech and growth stocks, Faber says that higher interest rates might be pushing stocks into a new environment.
Watch CNBC's full interview with Cambria Investment's Meb Faber
  + stars: | 2022-09-27 | by ( ) www.cnbc.com   time to read: 1 min
Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailWatch CNBC's full interview with Cambria Investment's Meb FaberMeb Faber, Cambria chief investment officer, joins 'TechCheck' to discuss if equity markets are ripe for a bounce, if the markets will come to reality on third-quarter earnings, and more.
Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailOur investing models are as bearish as they can be, says Cambria Investment's FaberMeb Faber, Cambria Investment Management, joins 'TechCheck' to discuss if equity markets are ripe for a bounce, if the markets will come to reality on Q3 earnings and more.
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