Speaker · Updated
Liz Ann Sonders: latest market views
Charles Schwab
Summary
Liz Ann Sonders is managing director and chief investment strategist at Charles Schwab, where she covers markets and the economy for individual investors and cohosts the On Investing podcast.
Chorus has 17 views from Liz Ann Sonders across 4 episodes on On Investing (Charles Schwab), Bloomberg Surveillance and CNBC Closing Bell since October 20, 2026. Their latest calls: bearish on Meta Platforms and CoreWeave.
Where they stand
Their latest bullish or bearish call on each company.
- Meta PlatformsBearish ·
- CoreWeaveBearish ·
What they talk about most
The latest views
Newest first. Every quote is checked against the episode's transcript.
AI infrastructure & data centers
AI build-out sustainability is the biggest market story, given surging capital demand and rising capital costs.
Sonders sees the sustainability of the AI build-out as the biggest macro story. Demand for capital for the build-out has increased significantly and its cost is rising. She cites Larry Fink of BlackRock saying the scramble for capital is unlike anything he has seen. She questions CapEx assumptions and whether revenue generation will keep pace with the spending. She also flags that data center restrictions have become a bipartisan 'not in my backyard' issue, which could threaten operators' revenue needed for ongoing profitability. Her view is that the market has been resilient but has 'fires in the engine' that show up under the hood, with AI build-out concerns among them.
“At least in my world, the biggest story at play here is the AI build out, the sustainability of it, the significantly increased demand for capital, the cost of that capital.”at 7:46
On Investing (Charles Schwab): The Fed Holds, but the Pressure Builds ·
Small-cap stocks show sharp divergence: profitable, low-leverage, high-coverage companies are outperforming weaker ones.
Sonders says the index's resilience masks underlying stress. In small caps, such as the Russell 2000, there is a widespread split between profitable and unprofitable companies. Lower debt-to-equity companies significantly outperform higher debt-to-equity ones. High interest-coverage stocks outperform low-coverage ones. She reads this as lenders and the market discerning high-quality borrowers who still have access to capital, and where the weaknesses are.
“...we certainly see that in the small cap space within, say, an index like the Russell [2000] where you're seeing a really, really widespread open up between profitable companies and nonprofitable companies. ... Lower debt to equity companies significantly outperforming higher debt to equity.”at 8:28
On Investing (Charles Schwab): The Fed Holds, but the Pressure Builds ·
Stocks can beat published consensus yet fall if they miss the wider buy-side whisper number.
Stocks can outperform the published sell-side consensus and still underperform unpublished buy-side expectations, the old whisper number. The gap between sell-side and buy-side estimates is therefore the key. Samsung reported better than the sell-side consensus but arguably undershot buy-side expectations, and its stock was taken to the woodshed.
“you can outperform the published sell side consensus and still underperform the unpublished buy side expectation.”at 4:49
Bloomberg Surveillance: Bloomberg Surveillance TV: October 23rd, 2026 ·
AI infrastructure & data centers
Hyperscaler capex financing matters more than capex size; falling cash flows mean more debt.
An undershoot in hyperscaler capex would be a bigger negative than healthy capex numbers would be a reinforcing positive. The key is how the spending is financed. Hyperscaler cash flows have dropped sharply, and their aggregate year-over-year cash flow growth has turned negative, which is why they are relying more on debt. She expects the market to stay bifurcated, with trouble concentrated down the quality spectrum away from mega caps.
“I think an undershooting of CapEx would be a bigger negative story than reinforcing what are pretty healthy CapEx numbers.”at 5:50
Bloomberg Surveillance: Bloomberg Surveillance TV: October 23rd, 2026 ·
Profitability is splitting small caps; the quality trade is likely to persist.
As of last week's close, profitable Russell 2000 stocks were up 18% year to date while unprofitable Russell 2000 stocks were slightly negative, an 18 to 19 point spread. She says the bigger underneath-the-surface story is interest coverage, debt to equity and the profit margin outlook. Since the October 2022 bear market low, only tech and communication services have outperformed the S&P 500, so positioning is concentrated. She expects the quality trade to persist.
“This is very much a quality trade, and I think that probably has some persistence.”at 7:07
Bloomberg Surveillance: Bloomberg Surveillance TV: October 23rd, 2026 ·
Meta PlatformsBearish
Meta's share issuance and its drag on hyperscaler free cash flow are weighing on the stock.
Meta sold off in response to issuing more shares, including non-voting ones, to fund its AI ambitions. Meta is one of the primary reasons aggregate hyperscaler free cash flow dropped so sharply. The equity market is sensitive to equity-financed AI spending, and that sensitivity also shows up in investment-grade credit.
“And Meta is one of the primary reasons why in an aggregate sense, ... you saw the hyperscalers free cash flow numbers drop so precipitously.”at 7:34
Bloomberg Surveillance: Bloomberg Surveillance TV: October 23rd, 2026 ·
AI exposure runs into corporate credit, so diversification must be judged by attribution.
With crowded trades and concentration on the equity side, a diversified portfolio has to account for AI exposure in fixed income. If a big part of the fixed income sleeve is corporate credit, the AI exposure spreads into bonds too. She argues diversification should now be thought of by attribution rather than purely by asset class.
“that you've got that AI exposure that spans into the fixed income side of the portfolio too.”at 8:19
Bloomberg Surveillance: Bloomberg Surveillance TV: October 23rd, 2026 ·
Market sentiment, positioning & volatility
Election-driven emotion is lifting volatility before the midterms; things should calm after.
Election-driven emotions are part of the anxiety. Volatility tends to pick up ahead of elections, and even more so ahead of midterms than presidential elections. It tends to calm down after the vote. She says this election-related skittishness is behind some of the nervousness under the surface of the major indexes.
“Part of the reason why volatility tends to pick up in advance of elections... midterm elections relative to presidential elections. But things do tend to calm down, after.”at 9:04
Bloomberg Surveillance: Bloomberg Surveillance TV: October 23rd, 2026 ·
Stock-bond correlation remains negative, so bond and stock prices are moving in the same direction.
Sonders measures the correlation between the 10-year yield and the S&P 500 over rolling one-month, three-month and one-year windows. The reading is still in negative territory, which means bond prices and stock prices are moving in the same direction. This is why investors question whether bonds still diversify equities. She adds that bond income and return of principal at maturity still matter even when prices are under pressure.
“I look at rolling one month, rolling three month, rolling one year, you name it, correlation between the ten year yield and the S and P 500. And that is still in negative territory.”at 4:28
On Investing (Charles Schwab): Can Bonds Still Do Their Job? ·
AI infrastructure & data centers
Debt financing of the AI build-out is a rising risk because long-duration investments meet fast-changing narratives.
Sonders argues that leverage and the debt financing increasingly needed for the AI build-out are the key concern, more than the spending itself. Leverage is financing the timeline from investment to payoff. Many AI investments have long durations, yet news flow and narratives in the space change rapidly. That gap between a long payoff horizon and fast-moving sentiment is why attention has moved to the debt side. She also contrasts the cost of capital with the return on invested capital as a central question for the CapEx spend.
“The timeline meaning from when the investment is made to when it bears fruit. And one of the problems in the world of AI is that a lot of these investments have a relatively long duration associated with them, yet news flow and narratives are changing in rapid fire fashion in this space.”at 9:17
On Investing (Charles Schwab): Can Bonds Still Do Their Job? ·
CoreWeaveBearish
CoreWeave, a leading neocloud, is among the most rate-sensitive AI names, funded with short-fuse debt.
CoreWeave is named as the 'poster child' for concerns about AI spending. Neoclouds rent out GPU compute, mostly from NVIDIA, to AI developers and sell essentially one service, unlike hyperscalers. Sonders argues neoclouds are arguably the most rate-sensitive corner of AI because they are long-duration growth companies funded with short-fuse debt. That mismatch leaves them highly exposed in a rising-rate environment, and that sensitivity is why CoreWeave-type names are in focus. She notes she is not an analyst and uses CoreWeave as a proxy for the broader AI spending debate.
“And the neo clouds are arguably the most rate sensitive corner of AI because they are... They're long duration growth companies, but they're funded with sort of short fuse debt, and there's just heightened sensitivity in a rising rate environment.”at 9:48
On Investing (Charles Schwab): Can Bonds Still Do Their Job? ·
Market leadership now favors profitable small caps over unprofitable ones, reversing last year's pattern.
Sonders looks below the cap-weighted index level at factors. Within the Russell 2000, profitable stocks are outperforming unprofitable ones by 18 percentage points. Last year, the reverse was true, with unprofitable stocks returning twice as much as profitable ones. She reads this as a hunt for quality in an environment of rising concern over earnings estimates, margin stability, CapEx spending and how that spending is financed. Her point is that the broad index hides these winners and losers.
“...the profitable Russell two thousand stocks are outperforming the nonprofitable Russell two thousand stocks by 18 percentage points.”at 10:50
On Investing (Charles Schwab): Can Bonds Still Do Their Job? ·
AI build-out imports offset booming business capex in GDP, since net exports subtract from growth.
Sonders expects the import-export relationship to matter for the upcoming GDP release. Much of what is being bought for the AI build-out is imported. Imports do not add to GDP because they show up as a net exports reading. Business capex numbers are booming, but imports offset part of that gain. Business capex is captured by nonresidential fixed investment, and the import drag keeps the headline growth contribution smaller than the capex surge implies.
“a lot of what is being purchased for the build out in AI are imports. That does not accrue to the benefit of GDP because it's a net exports reading.”at 18:56
On Investing (Charles Schwab): Can Bonds Still Do Their Job? ·
Market rotation is a momentum trade; investors should approach it by factor, not sector.
Sonders sees the broadening rotation as a momentum trade and welcomes it, since a cap-weighted index needs broad participation to keep rising. She ties the quality rotation more to rising yields than to a retreat to defense. Within the Russell 2000, profitable stocks now beat unprofitable ones by 18 percentage points, the reverse of last year, when unprofitable stocks crushed profitable ones. High-interest-coverage, low-volatility and low-debt names are also doing well. Her conclusion is that the market should be approached at the factor level rather than by sector or cohort.
“I've had this view that this rotation is the momentum trade. But the concern would be that cap weighted index would ultimately be weighed down if you didn't have enough participation.”at 22:29
AI infrastructure & data centers
Market worry has shifted to financing for highly levered AI buildouts, as AI timelines shrink.
Sonders says the concern has moved from the AI trade itself to financing. Investors are focused on highly levered companies, where the gap between investment and return is financed. The timeline associated with anything AI has shrunk significantly, so narratives, earnings estimates and capex assumptions change quickly. Leverage, she argues, explains the carnage in the more zombie-like, highly indebted segments of the market.
“I think the concern is now about the financing... the timeline associated with anything AI has shrunk so significantly. Narratives change quickly.”at 24:09
The Fed will likely skip next week and maybe hike in December; a gradual pace is equity-supportive.
Sonders expects the Fed to skip at next week's meeting and possibly hike again in December. Historically, the speed of hikes matters most for equities. A Fed that goes up 'by escalator, not elevator' has tended to be supportive, with low double-digit gains in the year after the first hike. If the Fed has to move sharply, with more than 25-basis-point moves, equity returns a year out from the start of the cycle have tended to turn negative.
“They're likely to skip next week, maybe hike again in December. So a Fed that takes the escalator up and not the elevator up tends to be supportive of kind of low double digit kind of gains in the year subsequent to the initial hike.”at 25:15
S&P profit margin assumptions look too high; energy costs and one-time gains aren't fully priced in.
The forward 12-month S&P 500 profit margin assumption has risen to 17-18%, which Sonders calls 'parabolic'. Energy is a feedstock for many industries, and she does not think higher energy costs have been fully worked into forward margin assumptions. Q2 earnings also got a boost from non-operating gains on stakes in SpaceX, Anthropic and OpenAI, and from tariff refunds booked quickly, which she thinks have not been extrapolated. Together these leave the bar for expectations, with 53% Q2 earnings growth, set too high.
“there have been these ongoing concerns about the stability in profit margins, because the forward twelve month S and P profit margin assumption is up to 17%, 18%. It's kind of gone parabolic.”at 26:07
Shows
- On Investing (Charles Schwab) · 2 episodes
- Bloomberg Surveillance · 1 episode
- CNBC Closing Bell · 1 episode
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