It’s that time of year. Pundit and prognosticator Bob Doll, senior portfolio manager and chief equity strategist with Nuveen, is out with his annual insights and expectations for markets and the economy in the year ahead.
“Over the latter part of 2019, there was an abundance of good news reported,” Doll said in a statement. “It’s our position that many of the positives are already reflected in current stock prices.”
But first …
Before getting into the new batch of predictions, how well did he do last year? Pretty good, by all indications.
Here’s the final score for 2019:
1). The U.S. expansion becomes the longest in history despite GDP slowing to a still-above trend increase of 2% to 2.5%. CORRECT
“Growth slowed slightly in 2019, but the final data will likely show that the U.S. grew at just over 2% for the year,” Doll explained. “And as of June 30, this current economic expansion became the longest in U.S. history.”
2). Unemployment bottoms in 2019 while wage growth continues to rise. CORRECT
“The last reading available showed unemployment at 3.5%, close to a 50-year low and wage growth has also continued to accelerate.”
3). The Treasury yield curve flattens, and credit spreads widen due to late-cycle concerns. HALF-CORRECT
“Bond markets were quite volatile in 2019, causing this prediction to fall into the half-correct category. The yield curve inverted on-and-off and flattened during 2019 (but did end the year sloped positively), while credit spreads tightened along with rising stock prices.”
4). Corporate earnings growth estimates weaken for 2019 and 2020 as both revenue and profit pressures rise. CORRECT
Both revenues and profits have come under pressure this year, Doll noted, causing earnings growth expectations for both 2019 and 2020 to fall by around 7% compared to the start of the year.
5). U.S. equities experience a positive return but fail to reach record highs for the first time in 10 years. HALF-CORRECT
“We’ll also wind up getting this one half-correct. Stocks soared higher for the year, setting new records. For all of 2019, the S&P 500 Index was up 31.5%.”
6). Non-U.S. stocks outperform U.S. stocks as the dollar sags. WRONG
This turned out to be the sole prediction he got wrong, as non-U.S. growth has been slower than we expected, and the U.S. dollar has risen.
7). The information technology, financial and health care sectors outperform utilities, REITs and materials. CORRECT
“A sharp rotation to cyclical areas of the market in the fourth quarter helped push this one to the correct category.”
8). The annual federal budget deficit approaches $1 trillion, a level unprecedented absent a recession. CORRECT
“Lower taxes and increased spending pushed the deficit to levels “never seen in non-recessionary years.”
9). U.S. and global politics spark more market volatility as the cold wars within the U.S. and with China persist. CORRECT
“Trade issues, Brexit worries, geopolitical hotspots and growing political and social discord have all been causing market volatility.”
10). A double-digit number of Democrats run for president while President Trump is challenged within his own party. CORRECT
“Before some marginal candidates started dropping out, well over 20 Democrats announced runs for the presidency.”
Bob Doll’s 10 Predictions for 2020
- The world avoids recession in 2020 as U.S. GDP grows over 2% and global GDP grows over 3%.
- Inflation and the 10-year U.S. Treasury yield end the year above 2% as the Fed stays on hold through the election.
- Earnings fall short of expectations, partially due to rising wage rates.
- Stocks, bonds and cash all return less than 5% for only the fourth time in 25 years.
- Non-U.S. stocks outpace U.S. stocks as the dollar retreats.
- Value and cyclicals outperform growth and defensive stocks.
- Financials, technology and health care outperform utilities, real estate and consumer discretionary.
- Active equity managers outperform their indexes for the first time in a decade.
- The cold wars within the U.S. and between the U.S. and China continue.
- The U.S. concludes a tumultuous political year with a status quo election.