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.
Bob Doll, formerly of Blackrock and now with Nuveen Asset Management, thinks cyclical stocks should fare well in 2013. Doll tells Bloomberg that he expects the economy will continue to “muddle through” this year, while earnings will be good (though not great) and valuations will rise a bit. He thinks a big bullish factor is the waning of fears of a Euro collapse, which dominated much of 2012. He’s high on cyclicals such as tech, energy, metals, and industrial stocks.
Blackrock’s Bob Doll says he sees more upside for stocks, but thinks volatility will be high for the rest of the year.
“We still believe there is further upside potential for stocks and other risk assets, but given all of the uncertainty, we expect the rest of the year will see some heightened levels of volatility as investors remain quite nervous about the number of downside risks,” Doll writes in his weekly commentary on Blackrock’s site. “There is little room for policy errors, but the trends to seem to be heading in the right direction.”
Doll says he thinks “the continuation of the current up-leg in global risk assets will largely be determined by the aggressiveness and success of policymakers in three critical regions: China, Europe and the United States.” He says the European Central Bank’s bond-buying problem won’t solve Europe’s troubles by itself, but “will offer a financial bridge to allow for structural and political changes to be made.” In the U.S., he says risks are growing surrounding the “fiscal cliff”. He expects the U.S. to continue to grow at about a 2% rate for some time.
Blackrock’s Bob Doll says current market valuations are providing a cushion that will help buoy the stock market even if earnings aren’t great.
“I don’t need great earnings for stocks to be OK at these valuations,” Doll tells The Wall Street Journal. “We would be having a different conversation if stocks were selling at 17 times earnings.” Doll also says that the U.S. market is helped by the belief that it offers more safety for investors than other markets. “There’s a semi-safe-haven status for U.S. stocks,” he says. “Investors aren’t going to buy emerging markets because those economies are slowing, they’re definitely not going to buy Europe, but the U.S. is most likely going to be OK.”
Charles Schwab Chief Investment Strategist Liz Ann Sonders, meanwhile, tells the Journal that the economy is avoiding recession. “Things aren’t fabulous, but they aren’t recession-like,” she said. She expects the economy to continue to be a “muddle-through environment”. Sonders expects volatility from stocks, but says “it should be a pretty decent year.”
Blackrock’s Bob Doll says that, while the economy has been faltering for the past few months, he doesn’t think the U.S. is headed into a recession, and he remains cautiously bullish.
In commentary on Blackrock’s site, Doll says slowing global growth, the U.S. fiscal cliff, and weak business confidence are all making for serious headwinds for the economy. “It would be an overreaction, however, to suggest that the U.S. economy is also heading into a recession,” he says. “There are a number of important sources of strength within the United States: the strong financial health of the corporate sector, a healing banking system, historically low levels of credit card delinquencies and signs of increased discretionary spending by consumers. Our view is that absent some sort of new catastrophic event, US growth should remain positive, if hardly stellar.”
Doll says he expects corporate earnings to continue to grow, but at a “sluggish” pace. And he sees stocks climbing higher, but in a jagged fashion. “Our forecast is that stocks should continue to climb higher, but that we will see some continued back-and-forth in prices,” he writes. “There is still room for additional policy easing around the world given weak growth levels and low levels of inflation. Equities do generally benefit during times of policy reflation, but they do so in a volatile fashion given the associated backdrop of economic concerns.” While many investors are positioned either defensively or bearishly, he says that the macroeconomic risks are already priced into markets. “Valuation levels for stocks would also appear to provide support,” he says. “Our long-term view for equities is still a positive one, but we are not expecting to see a significant upside breakout unless and until more policy clarity emerges.”
Blackrock’s Bob Doll says he continues to believe the European debt crisis will be contained, and says the stock market’s recent troubles have made for some good buying opportunities.
“There remains a high degree of near-term risk and the possibility of short-term turmoil given the evolving crisis in Europe, fiscal issues in the United States and the uncertainty over China’s growth slowdown, but our view continues to be that global economic growth will remain acceptable with conditions gradually improving in the second half of the year,” Doll writes in his latest commentary on Blackrock’s site. “Leading global economic indicators are rising, the US recovery has grown more firm and earnings momentum is positive. There is still quite a bit more that needs to be done on the part of policymakers around the world to take the necessary steps, but the trends are pointing in the right direction.”
Doll says that much of the global economy’s fate hinges, not surprisingly, on Europe. “If Europe’s debt crisis remains reasonably well contained, the world should continue to grow at a modest pace with the United States doing relatively well; if debt contagion becomes chaotic and uncontrollable, it would be an entirely different story,” he writes. “Our view continues to be that the former scenario is the more likely one.”
With that in mind, he says stocks look attractive. “Assuming that the world is not headed for a renewed deflationary spiral, there is little doubt in our view that stocks are poised to provide superior long-term returns over bonds given their current levels,” he says.
While equity markets have struggled in recent weeks, Blackrock’s Bob Doll says it’s not the start of a bear market.
“Although markets have been troubled in recent weeks, we do not believe investors should confuse the current situation with an ending to the bull market that has been in force since early 2009,” Doll writes in his latest commentary on Blackrock’s site. “Historically, sustained declines in equity prices tend to be associated with either economic downturns or earnings recessions, neither of which appears to be in the cards.”
Doll says the European debt situation is a “significant downside risk,” but doesn’t think it will derail the global economy. He also says the fears of big economic problems for China are overblown.
“Bearish sentiment has increased in recent weeks and confidence has taken a hit,” Doll adds. “At present, the risk premium for US stocks looks high to us, which implies that the markets have already discounted some significant downside risk in share prices. The risks are real, but in our view, as long as the economy is able to continue along the path of recovery, the risk premium should fall in the coming months. As such, we maintain our view that the current bull market has not yet reached a peak.”