Liz Ann Sonders spoke to Maggie Rodriguez about the drop in global markets after the Dow Jones' 700-point plunge.

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Global Markets Spiral Downward
Charles Schwab's Liz Ann Sonders spoke to Maggie Rodriguez about the drop in global markets after the Dow Jones' 700-point plunge.

An advance copy of Liz Ann Sonders' newsletter article from the December 2008, issue of Schwab Investing Insights®, a monthly publication for Schwab clients.

Food for thought: The last day of a bear market is always the first day of a bull market. Put another way, the day in the bear market when losses are most severe and despair is typically most extreme is also the day in the subsequent bull market when return opportunities are greatest. I don't know whether the November 20 equity market low will ultimately hold, but a new bull run entered the record books with a 21% rally in the S&P 500 as of December 8.
The drivers: larger-than-expected interest rate cuts globally; the coming fiscal stimulus plan from the Obama administration; exceptionally low cash yields; and the hope that we're sufficiently far enough through the recession to allow a market bottom to form. Volatility diverged from the market recently, too, not breaking out to new highs as the market sold off into the November low … a possible sign of sellers' exhaustion. Read more...