Nuveen’s Bob Doll on Voting, VIX and Where We’re Headed Next

Better stick to the investing interstate.
Better stick to the investing interstate.

“If you have a 401(k), and are thinking long term, you should consider putting your cash to work.”

Smart advice from high-profile money manager and market prognosticator Bob Doll, chief equity strategist and senior talking-head with Nuveen.

And while it sounds simple enough, the underlying explanation is anything but, one reason so many plan participants and advisors rely on Doll to help sort it all out.

The VIX measurement of volatility, or more accurately a measure of standard deviation, is extremely low at the moment, and has been for some time, Doll says, when asked about current market conditions as they relate to 401(k) savers.

“The reason is that investors are figuring it out and staying the course, although they are accumulating cash,” he adds. “Stocks have returned 8 percent, bonds around 6 percent and cash zero, obviously.”

Much has been made recently of the so-called “low volatility anomaly,” the argument that portfolios with low-volatility stocks have returned better risk-adjusted returns in the current environment than portfolios consisting of higher-volatility stocks. In other words, investors aren’t getting paid for the risk they’re taking.

“Investors are frustrated, especially with bond portfolios,” Doll admits, before adding with a laugh, “but they’re getting 6 percent, so they actually are getting paid.”

One area of concern for 401(k) advisors, and investment professionals in general, is the possibility that markets have topped, and a correction is coming.

“A correction of 10 percent is a random walk,” he notes, referring to Burton Malkiel’s investing staple. “Someone will call a correction and in hindsight look like a genius, but it could’ve just as easily gone the other way. Right now, there doesn’t seem to be a lot of room for upside or downside; we’re stuck somewhere between the two. We’ve been here since the beginning of the year at least, and it could go on.”

Whether or not participants should be invested in light of the possibility of a correction is the wrong question, Doll contends; the right question is what to own or not to own .

“We lean risk-on and away from risk-off at the moment. We lean cyclicals, and away from defensive positions. You’ll see we get most of our returns from domestic stocks, and not so much from multinationals. But as far as short-term changes, the third-quarter was very, very different from the first half of the year.”

For instance, he notes utilities and telecom were the best performing sectors in the first half of the year, and the worst in the third quarter. Conversely, tech and financials were the worst performing in the first half the year and the best performing in the third quarter.

“So the market has changed quite a bit in that sense.”

As for the all-important election, its impact is routinely overblown by investors.

“Roughly 90 percent of what Clinton says she’ll do won’t happen, and 90 percent of what Trump says he’ll do won’t happen, because a Republican Congress won’t let it happen. Markets are consistent long-term; it doesn’t matter if there is an R or a D next to the president’s name.”

Whenever Clinton has done better in the polls, the markets have generally trended up, because markets like certainty and they know what they are getting.

“When Donald was up in the polls, it introduced uncertainty, and they don’t know what they are getting,” Doll says. “Clearly, markets think Hillary will win. If she does win, people will wake up the next day and say hello and move on to more important things. If Trump wins, there will be a mild setback, as markets absorb what it really means going forward.”

Ultimately, Doll concludes, either candidate will cause a market run-up because so many investors are in cash in anticipation of the election’s aforementioned overblown impact.

“I think if the market goes down as a result of the election more people will say, ‘I think I’m going to buy some stocks.’”

Specific to the 401(k) space, Nuveen offers the 401(k)ollege, a “business development resource” to support advisors in growing a healthy retirement plan practice. It provides educational workshops, retirement and investment Insights, “actionable” business building tools, as well as plan sponsor and participant resources.

In another creative use of the “k” in 401(k), the company also offers a Plan Profit (k)alculator which, after a few inputs, generates the advisors’ “profitability analysis” and “reviews potential strategies to enhance the [plan’s] health and overall profitability.”

John Sullivan
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With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.

1 comment
  1. Simplicity,Depth and Clarity of his analysis are Bob Doll’s weapons against the ambiguity of the market and economy…benefits most coveted by investors and advisors alike. (NYSE Registered Rep since 1969).

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