How to stay invested as volatility continues to shake up markets

US stocks (^DJI, ^IXIC, ^GSPC) closed Tuesday's session in negative territory as volatility and inflation concerns persist in the current market.

Schwab Asset Management CEO and CIO Omar Aguilar explains how investors should be interpreting today's market signals, such as the latest earnings season results and AI spending.

You were saying, take a deep breath, stay calm, stay invested. How come, Omar? Why aren't you more worried?

Well, it is normal to actually experience volatility and feel a little concerned. That's actually part of just psychology and behavior. Um, but people need to remember, we have seen this movie before. We have seen all prices go up even way higher than what we are levels now. Uh and then, you know, the next part of news and the next part of the evolution will probably come down different. Um if you take a look at more long-term horizon, if you think about what your investment objectives are and you follow a discipline, that will actually help you in trying to understand what is really driving, you know, your investments. And when you think about the macro picture, when you think about where we are in the economy, the economy is growing. When you think about the labor market, the labor market based on the reports we saw last week, they're fairly consistent. Earnings are very, very very robust and were incredibly good in the second quarter. Then when you actually look at the capital expenditure cycle, when you see everything that goes in through AI, that also is translating into significant changes in wages and changes in the market. Yes, there is inflation concerns, there is volatility concerns, there is interest rate concerns, and actually you got to balance this too, but staying invested is always a better answer.

So, to your point, the economy is resilient. I look at the Atlanta Fed GDP tracker had a four handle last time I looked on it, right? Earnings, I mean, isn't that isn't that still the story for this stock market? Earnings as you point out are impressive. Margins are impressive. Now, some say, interested in what you take on this, Omar, they say, okay, it is impressive. And you know what they'll say, it's as good as it gets. It's as good as it gets with earnings growth. What do you say to that?

Well, the the earnings story is actually pretty good. When you actually think about the drivers of earnings growth and you think about, you know, what the projection is. Usually earnings, you know, grow at the same level that the economy. So, as long as the economy and as long as we have consumption, you know, those earnings trajectories have the opportunity to to continue to grow the same pace. Now, the biggest part of this is really just how much you think valuation matters. Because you know, that is the biggest concern if you actually think about the earnings picture is

Is that a concern to you that we're priced in too much?

We're pricing too much. We're clearly putting too much emphasis on, you know, profitability out of the capital expenditure cycle. So looking at how much of that return on investments and return on equity will give you after this cycle goes through. That's going to be a really good test, but that's not going to be seen until probably the second part of next year. I think what we're seeing right now is that all that capital expenditure, business expenditure and consumption are continued to have a really nice net for earnings to continue through next two quarters.