Instability drives volatility as risk appetite fades and global markets reprice

Summary

Liz Ann Sonders, Chief Investment Strategist at Schwab Center for Financial Research, says the market backdrop is characterized by instability rather than simple uncertainty. After a sharp selloff, she sees potential for a retail-driven buy-the-dip bounce, while geopolitical and trade-policy headlines feed the 'Sell America' trade and concerns about U.S. Treasury selling. She frames the longer-term move away from concentrated U.S. Treasury exposure as a decade-long diversification story.

• Schwab's Liz Ann Sonders describes the current market regime as unstable, with geopolitics, trade policy, and monetary policy constantly shifting.
• She expects a possible short-term rebound after the recent selloff, citing retail traders' buy-the-dip conditioning.
• She says the 'Sell America' trade was active during the selloff and may produce recurring bouts of selling.
• A Danish pension fund's plan to sell U.S. Treasuries added to concerns about foreign demand.
• She notes a decade-long diversification trend away from concentrated U.S. Treasury exposure.
• Long-dated Japanese government bonds were cited as one factor in the broader market backdrop.