By coinnews 
00:00 Speaker A
J.P. Morgan’s CEO Jamie Dimon warning of complacency in markets citing a slew of risks on the horizon. Commentary comes after US stocks closed out six consecutive days of gains on the brink of a bull market. So are investors underpricing risks? Joining us now Liz Ann Saunders, Charles Schwab’s Chief investment strategist. Liz Ann, great to have you on this morning. Talk to me about Jamie Dimon’s commentary. Is he right? Are investors underpricing risks to come?
00:40 Liz Ann Sonders
Uh, I do think there is some complacency. You did see an incredible whipsaw, obviously in the market, but also in sentiment, but even at the early April lows, you hadn’t quite gotten the full wash out in sentiment. You saw it in the attitudinal measures of sentiment, the survey data, a metric like American Association of Individual Investors, which does admittedly skew older, uh, on the spectrum, and you did see a bit of a wash out, but it was not corroborated by behavioral measures of sentiment. What we did see, and for now it was the right move, you know, that buy the dip mentality. The rally has been driven in large part by things like retail favorites and meme stocks and non-profitable, uh, tech. So I think that that whipsaw back higher, much as we had had some wash out in sentiment, we may be at that point where the setup from a sentiment perspective, uh, suggests that the market could have some downside if we get a negative catalyst. And that’s really the best way to think about this market. It’s hard to judge it based on what policy announcements are going to be and when they’re going to come. That’s a fool’s errand. I think it’s the technical and sentiment setup that’s important, and we probably do have some complacency back in the mix.
02:46 Speaker A
So that’s really smart, smart framework for our investor audience. We could get downside if we do get a negative catalyst. What is that negative catalyst that you are most on watch for coming up?
03:06 Liz Ann Sonders
So it could be that the benign inflation data that we have seen simply reflects the fact that with postponements and delays, we have had, uh, in terms of the inflation data and the reference period, the period through which we got CPI and PPI data, really only had an average effective tariff rate of 4%, maybe close to four and a half percent versus the two and a half percent that existed before. So not a big delta there. I think if we were to start to see indications of a pickup in inflation, uh, that could be a negative, uh, catalyst. That would, uh, put maybe the Fed further on the back of their, uh, heels, and or, I think probably the bigger risk, although I don’t see it imminently, but but on the subject of what could be a bit of a tipping point, would be a more rapid deterioration in the labor market, particularly given that that’s what the Fed has the closest eye on right now. So at the economic level, I think those could be, uh, problematic. And we are starting to hear from companies, not Home Depot today, but Walmart raising prices. We saw it with Subaru today. So I think it’s the feeder into the inflation side that represents maybe the most obvious near-term risk.
05:02 Speaker A
And to that end, this morning, one of the great charts you posted was the divergence we’re seeing in the inflation data and consumer sentiment, really falling off of a cliff. What does it take to kind of shift consumer sentiment into consumer behavior that could then lead to things like cracks in the labor market that you mentioned?
05:28 Liz Ann Sonders
Yes. So this is part of the discussion that I think is, uh, a valid discussion these days is to whether the soft data is overstating weakness in the economy. And that would be all the survey-based data, consumer sentiment, consumer confidence within consumer sentiment. To your point, Madison, you’ve got the inflation expectations piece, which has not, at least yet, been corroborated by what we’re actually seeing in inflation. Now, of course, inflation expectations are forward-looking. The inflation data we have in our pocket is backward-looking. I think expectations are important. They don’t necessarily represent a perfect guide for where inflation is going to be, but inflation to some degree, as is the economic backdrop, is driven by confidence. It’s driven by behaviors, anticipatory behaviors on the part of consumers. Not to mention the fact that the Fed pays attention to inflation expectations. And whether it’s one year or five to 10 years, they have absolutely spiked. That could start to change behavior. If it’s not ultimately corroborated in the next month or two by the actual data, then I would expect to see inflation expectations retreat a bit. I think the most likely scenario right now, more broadly, in terms of the really weak soft data and the more resilient hard data is probably a bit of a convergence between the two, some weakening in the hard data, but maybe some improvement in the soft data, as opposed to one solely giving way to the other.