As the first half draws to a close, Nuveen weighed in this week with its outlook for the July-to-December period. In brief:
- Nuveen expects U.S. economic growth to accelerate and inflation to continue to move modestly higher.
- Before equity markets can break out of their trading ranges, headwinds such as mounting trade issues need to ease.
- Equities will outperform bonds this year, with volatility remaining relatively elevated.
“Our overall theme for the year has been that we expect 2018 to be ‘less perfect’ than 2017, as we see continued decent economic growth and corporate earnings, as well as low but rising inflation and yields,” Bob Doll, Nuveen’s senior portfolio manager and chief equity strategist, wrote in a recent commentary.
“At the halfway point of 2018, the year is mostly shaping us as we expected.”
At the beginning of the year, Doll made 10 predictions for the markets in 2018. He took a look at how those predictions are shaping up so far. Overall, he scored seven as “heading in the right direction” and three as “too early to call”:
Prediction 1: U.S. real GDP reaches 3% and nominal GDP 5% for the first time in over a decade.
Nuveen expects economic growth to rebound after coming in at a relatively slow 2.2% in the first quarter, and accelerate past 3%, thanks especially to the robust labor market, a boost from additional fiscal stimulus and rising capital expenditures. With inflation climbing modestly, nominal GDP growth should climb to 5% for the first time in more than a decade.
Scorecard: Heading in the right direction
Prediction 2: Despite ongoing protectionism, the global expansion continues with the fewest countries in recession in history.