As the end of the year approaches, many investors are still questioning how 2024 will shape up considering ongoing and potential economic uncertainties. Some Wall Street experts believe that there will be a soft landing in 2024, while others believe there is hardship ahead. Charles Schwab Chief Investment Strategist Liz Ann Sonders is in the harsher economic camp, but indicates there is still hope on the horizon for the stock market.

She joins Yahoo Finance to discuss the outlook for 2024, stating: "I think this is the time for discipline. Discipline, risk management, and it's about diversification and rebalancing — that's the best way to navigate an uncertain environment."

Click here to watch the full interview on the Yahoo Finance YouTube page or you can watch this full episode of Yahoo Finance Live here.

Video Transcript

SEANA SMITH: Liz Ann, I think a lot of investors out there are trying to figure out exactly the best ways to play this market, given the uncertainty around the Fed, given the fact that we obviously don't know when exactly the rate cuts are going to start. We've seen some excitement. When you take a look at some of those [? beaten ?] down names, like the Russell 2000 and the small-caps, over the last several weeks, are you seeing some tailwind there as we look ahead to 2024? And where else are you seeing those best opportunities?

LIZ ANN SONDERS: It is interesting. Because over the past month, the Russell 2000 is actually outperforming the S&P 500. And I think that that is indicative of some money that is looking to move into areas other than just the Magnificent 7 in the interest of seeing a broadening out.

However, within that, I think you want to fade, to use trader lingo, the lower quality names that have done well, but continue to lean in up the quality spectrum. And one thing that's interesting about the Russell 2000 as an index, it's the most common small-cap benchmark that's used. But there's also the S&P 600 as an index.

The only reason why I mention those two is that Russell doesn't use a profitability filter. There's close to 40% of stocks in that index that are not profitable. 31% of stocks in that index are zombie companies, versus the S&P 600 that has a profitability filter.

And as a result, it's trading at a multiple about, I don't know, eight or nine points lower than the Russell 2000. So I'm not recommending the index. But if you're looking for an index as a source for ideas, inherently, you have a higher quality index with the S&P 600 because of that profitability filter.

BRAD SMITH: Liz Ann, just lastly while we have you here, we're in the holiday spirit. I mean, we're getting close to the end of the year. We're trying to put together some New Year's resolutions. Mine is to just say, [? serenity ?] now, just a little bit less next year. And for that, I need a top idea. What is your top idea of kind of getting into 2024?

LIZ ANN SONDERS: Discipline. I think this is the time for discipline risk management. And it's about diversification and rebalancing. That's the best way to navigate through an uncertain environment.

BRAD SMITH: Liz Ann Sonders, Charles Schwab chief investment strategist, great to have you here this morning.

LIZ ANN SONDERS: Good to see you.

BRAD SMITH: We appreciate the time.