Every year Bob Doll makes 10 predictions about the economy and markets, and every year he scores his prior year predictions while looking ahead 12 months.
On Wednesday at the Lotos Club in New York, Doll gave himself a 6.5 rating (out of 10) for his 2014 predictions, while he characterized 2015 as a year of “increasing belief” in the bull market; 2014, he said, was “the least believed bull market of my career.”
So what does Nuveen’s chief equity strategist predict in 2015 for the markets and economy? There’s “solid momentum in U.S. economic growth with low inflation,” he said on Wednesday, while the “jobs market is ebullient.” While there was a “dichotomy” between the U.S. economy and the bull stock market, the “real economy is improving,”
He expects U.S. corporations to post a “solid year of earnings growth” in 2015, and says those companies will spend some of those earnings on stock buybacks, increased dividends, increased capital expenditures and, yes, hiring new employees.
The precipitous drop in oil prices is “good for all consumers; not good for energy producers,” but the swiftness of the decline in oil prices is giving the markets something to “worry about.” As for other clouds on the horizon, Doll said most of the “problems are outside the U.S.,” such as the possibility of deflation in Europe and reflation in Japan, though cyberterrorism is also cause for concern.
As for the markets, Doll predicted that U.S. equities will “enjoy another good yet volatile year” in 2015 and that U.S. equity mutual funds will see “significant inflows.” The “volatility” that will be in evidence during the year will in fact be a return to a more normal level of volatility, not the low levels that prevailed in 2014.
Over all, he believes the U.S. is in the “transition to the second half of the business recovery,” which is traditionally when wage gains occur, mentioning in response to a question from this reporter that in the last six months, “corporate America has hired more workers than at any other” such period over the past 25 years.
Check out last year’s list, Bob Doll: 10 Economic Predictions for 2014.
Following are Bob Doll’s 10 predictions for 2015.
1. U.S. GDP grows 3% for the first time since 2005.
The U.S. economy looks “increasingly able to stand on its own two feet and no longer requires first aid from the Federal Reserve,” Doll wrote. Moreover, “GDP may benefit from lower oil prices,” Doll said, and while energy explorers and producers may cut back on capital expenditures, energy accounts for only 10% of overall U.S. capex spending. He pointed out that the U.S. “manufacturing renaissance” is now in its fourth year, and that he already sees “some signs of rising wages,” a trend that would be consistent with the U.S. being in the second phase of a business recovery. Contrary to popular opinion, Doll said that the jobs added during the revovery were “mainly high-wage” jobs.
The only drag on the economy would come from a drop in exports due to slower economic growth abroad and a high dollar, but he pointed out that exports account for only 12% of U.S. GDP, compared with Germany, for example, where exports account for nearly 50% of the economy.
2. Core inflation remains contained, but wage growth begins to increase.