1. The U.S. expansion becomes the longest in history despite GDP slowing to 2%-2.5%.
2. Unemployment bottoms out while wage growth continues to rise. (The U.S. unemployment rate rose to 3.9% in December from 3.7% in November, which matched the September rate that was the lowest in 50 years.)
3. The Treasury yield curve flattens and credit spreads widen due to late cycle concerns.
4. Corporate earnings growth estimates weaken for 2019 and 2020 as both revenue and profit pressures rise. (This is has already begun with Apple’s announcement lowering earnings and revenue estimates from two months ago.)
5. U.S. equities experience a positive return but fail to reach record highs for the first time in 10 years. (The S&P 500 posted its first annual loss in 2018 in 10 years, down 6.2% excluding dividends).

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6. Non-U.S. stocks outperform U.S. stocks as the dollar sags. (The WSJ Dollar Index, which measures the U.S. currency’s performance against a basket of 16 others, climbed 4.3% in 2018).
7. Information technology, financial and health care sectors outperform utilities, REITs and materials.
8. The annual federal budget deficit approaches $1 trillion, a level unprecedented absent a recession.
9. U.S. and global politics spark more market volatility as the cold wars within the U.S. and with China persist.
10. A double-digit number of Democrats run for president while President Trump is challenged within his own party. (Photo: AP)

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(Related: Bob Doll’s 10 Predictions for 2018)

Bob Doll, chief equity strategist at Nuveen, is forecasting positive returns for U.S. stocks and even higher returns for non-U.S. equities in 2019 following declines in both in 2018.

Those are just two of Doll’s top 10 predictions for the year, which he offers every year along with a midyear update.

“The biggest question for markets is whether the U.S. is heading into a recession,” writes Doll. “Recessions are inevitable, but we think one is unlikely to commence in 2019. If we’re right, equities will probably see gains over the next 12 months. If we’re wrong, it will be a tough year for the markets and for our predictions.”

(Related: Gary Shilling Sees 66% Chance of Recession in 2019

In either case, Doll expects “markets will remain choppy and frustrating and stocks will bounce around with extended runs and declines,” not unlike the stock market’s performance in recent months.

He expects “2019 will be a difficult environment for investors” because volatility will remain “elevated.”

Doll says 2,650 is a “reasonable year-end target range for the S&P 500.” That is about 5% above its level in late afternoon trading on Thursday.

Several of Doll’s predictions for 2019 represent an extension of recent trends or confirmation of current expectations. The U.S. expansion is already the second longest in history, the Treasury yield continues to flatten and tensions between the U.S. and China and between Democrats and Republicans continue with no signs of abating or compromise, for example.

Doll’s top 10 predictions for 2018 proved to be about 80% correct. His biggest miss: equities beating bonds for the seventh consecutive year. Bonds and even cash beat major equity indexes in 2018 due to steep stock declines in the last few weeks of the year. After falling almost 9% in December — the worst December since 1931 — the S&P finished 2018 down 6.2%.

Check out the gallery above to see Doll’s 10 predictions for 2019.

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