Nuveen’s Bob Doll says this bull market and economic recovery has been the least believed of his career. But he says that has made for an excellent investment environment — and he doesn’t think we’re done.
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A stronger dollar and falling oil prices tend to help the economy, but right now those two factors aren’t helping stocks, Nuveen’s Bob Doll says.
While many people are wondering whether the bull market is running out of steam, Jim Paulsen and some other top strategists think it has a ways to go.
Heading into 2014, Nuveen’s Bob Doll sees growth strengthening and a good year — though not as good as 2013 — for stocks.
Doll writes for Barrons that he expects the US economy to grow at a 3% clip in 2014, with growth strengthening thanks to a “litany of hopeful signs includes the housing recovery, falling oil prices, acceptable job growth, easing lending standards, low inflation, all-time high net worth, rising capital expenditures, less fiscal drag, and improving non-U.S. growth.” He thinks it’s likely that stock market gains will rely on earnings growth after the multiple expansion we’ve seen in the past year, and he thinks “high single digit or low double-digit percentage gains [for stocks] are not unreasonable” to expect, though he adds that a correction driven by technicals is likely sometime during the year. “We would use pullbacks as buying opportunities as most fundamentals continue to improve,” he says.
Doll also expects cyclical stocks to outperform defensive plays, the dollar to strengthen, and gold to fall. And he thinks the bond bear bear market will continue. One interesting stock-picking note: Doll said he prefers using dividend growth and free cash flow yield to straight dividend yield.
Nuveen Asset Management’s Bob Doll thinks the market’s next big move will be higher, but says it won’t happen until earnings and revenue growth pick up. “If global growths improves, the U.S. will participate, (but) we won’t lead the way,” Doll tells Yahoo! Finance’s Breakout, saying that he expects improvement in U.S. earnings and data, though not right away. He says that manufacturing data has been picking up both in the U.S. and abroad, however, making industrial stocks attractive. “They’re all ticking up, not just in the U.S., but around the world,” Doll says, referring to global purchasing manager surveys. He thinks that in the short run the “global growth trade is catching fire in other places that have been so depressed,” but he thinks “you have to have some money in the U.S.” as well. Doll says to keep an eye on the housing market, though. “In a fragile economy like we have, you cannot have a 100 basis point move up in interest rates in six or eight weeks and expect nothing to be touched,” he says, though he adds that he doesn’t think the rate increases have yet been enough to derail the economy.
Charles Schwab Chief Investment Strategist Liz Ann Sonders says pessimism is still dominating the market — and that has her feeling bullish.
“It is shocking that four years into a bull market we still have massive outflows out of equity. I’m amazed at how much skepticism I’m still met with after four years,” Sonders said in her keynote address at the Financial Planning Association’s New York chapter in early May, Advisor One reports. “I’m not a perma-bull, but I’m optimistic. At conferences, almost all the questions are bearish. I love that because I’m a contrarian.”
Sonders also says that the U.S. is going through a manufacturing and energy renaissance. Her favorite “emerging market”, she said, is now “Middle America”, where that renaissance is based. Sonders said that, on a recent trip to China, several representatives of the American Chamber of Commerce in China told her that they planned on bringing their businesses back to the U.S. over the next decade amid the shift.
Advisor One also highlighted some other bullish advisors, including Bob Doll, Chief Equity Strategist at Nuveen. Doll recently told onlookers at the Tiburon CEO Summit that those investors who are waiting for things to get better before putting money into stocks are missing the boat. “People can’t wait for the pullback to put some money in the market,” he said. “There’s a lot of cash sloshing around and looking for an entry point.”
Doll expects payout ratios and dividends to rise. He likes large-cap stocks over small caps, and industrial and tech sector cyclicals over defensive stocks.
Top strategist Jim Rogers says the economy is shifting from one that is driven by the financial sector to one that will be driven by commodities. Rogers tells CNBC that farming will be a “fantastic” place to be going forward. He also says he owns stocks in Japan and a few other places, though he doesn’t like Japan’s recent currency debasing efforts. Rogers is short long-term government bonds, but he says he’s not sure that a real bull market will emerge in stocks, calling the recent market gains “artificial” due to money printing. Bob Doll of Nuveen Asset Management says, meanwhile, that he agrees with much of Rogers’ contentions, but that the “powerful wall of liquidity” being provided by central banks around the world must be respected — and right now that wall of liquidity is a bullish force for stocks. Doll says he sees relative value in stocks, noting that dividend yields for about 50% of S&P 500 companies are above the yields on treasury bonds.