As he has for nearly 30 years, Bob Doll, who serves as Nuveen’s Senior Portfolio Manager & Chief Equity Strategist, offers annual predictions on the trends and issues he believes are positioned to shape the economy and markets for the coming year. So what does he see for 2020?
A year ago, Doll wrote that 2019 would be “choppy and frustrating,” but he did not foresee a recession coming. In retrospect, “We got the ‘choppy’ and ‘no recession’ parts right,” he says now, “but it’s hard to argue that the past year was frustrating for investors, with stocks experiencing one of the best years in history.”
Doll’s 2020 outlook is that “uncertainties diminish, but markets struggle… Economic growth could pick up as we head into 2020, but we don’t think stocks will come close to the lofty results they reached this past year,” Doll says.
He sees both positives and negatives for stocks in the coming year, with some key risks looking more manageable, while other fundamental factors may be working against the markets.
Doll observes that the global economy appears to be on “more solid footing,” largely due to a strong U.S. consumer sector and labor market. He explains that some of the big risks, like trade disputes, Brexit uncertainty and U.S. budget negotiations seem clearer now compared to a year ago. “In fact, one of the biggest risks today may be that stocks have already priced in much of the good news,” Doll advises.
He further suggests that the “main culprit” behind any economic weakness continues to be the rise in protectionism and broad trade policy uncertainty. “At present, equity prices reflect a better trade environment, and we hope those signals are correct,” he writes, adding that a reduction in tariff levels or trade tensions would be bullish for stocks.
And while he has concerns about relatively weak global manufacturing and trade and the tendency of the yield curve to invert, Doll believes the U.S. or global economy is unlikely to slip into recession in 2020.
Against that backdrop, here are Doll’s 10 predictions for 2020:
1. The world avoids recession in 2020 as U.S. GDP grows more than 2% and global GDP grows more than 3%.
2. Inflation and the 10-year U.S. Treasury yield end the year above 2% as the Fed stays on hold through the election.
3. Earnings fall short of expectations, partially due to rising wage rates.
4. Stocks, bonds and cash all return less than 5% for only the fourth time in 25 years.
5. Non-U.S. stocks outpace U.S. stocks as the dollar retreats.
6. Value and cyclicals outperform growth and defensive stocks.
7. Financials, technology and health care outperform utilities, real estate and consumer discretionary.
8. Active equity managers outperform their indexes for the first time in a decade.
9. The cold wars within the U.S. and between the U.S. and China continue.
10. The U.S. concludes a tumultuous political year with a status quo election.
