Doll: Most 2019 Predictions Trending in Right Direction

In a mid-year update on his 10 economic predictions for 2019, Robert Doll, Nuveen’s Chief Equity Strategist & Senior Portfolio Manager, observes that, while it is still early, most of his predictions are trending in the right direction.  

At the beginning of each year, Doll takes a comprehensive look at the trends he believes are positioned to shape the economy and markets for the coming year. He predicted at the beginning of 2019 that this year would be “choppy and frustrating,” but did not foresee a recession. 

That sentiment still holds true, according to Doll, who notes that while the global economy may have slowed, he still isn’t forecasting a recession. “We don’t have final second quarter growth numbers yet, but as of the end of the quarter, this current expansion has become the longest in U.S. history,” Doll notes. He explains that the U.S. economy appears to be in a bit of a weak patch, but remains confident that overall 2019 GDP will grow over 2% for the year. 

As for corporate earnings, he observes that both revenues and profits have come under pressure, and as a result, earnings growth expectations for 2019 and 2020 have fallen nearly 6% from the beginning of this year. At this point, he believes 2019 estimates have come down to “reasonable levels” but thinks 2020 expectations still appear too high and may fall more. 

As he noted at the 2019 NAPA 401(k) Summit in April, Doll stocks are still up strongly for the first half of the year, but investors are focused on downside risks. “With stocks fully valued, we think investors should focus on selectivity,” Doll advises in his update. He predicts that investing is likely to be challenging from here, and suggests that remaining flexible will be critical. “We believe this is an environment where the benefits of active management and flexibility are likely to grow in importance,” he states.  

Here’s how Doll assesses his 2019 predictions at mid-year:  

1. The U.S. expansion becomes the longest in history despite GDP slowing to a still-above-trend increase of 2% to 2.5% – heading in the right direction.
2. Unemployment bottoms in 2019 while wage growth continues to rise – heading in the right direction. 
3. The Treasury yield curve flattens and credit spreads widen due to late cycle concerns – too early to call.
4. Corporate earnings growth estimates weaken for 2019 and 2020 as both revenue and profit pressures rise – heading in the right direction.
5. U.S. equities experience a positive return, but fail to reach record highs for the first time in 10 years – too early to call. 
6. Non-U.S. stocks outperform U.S. stocks as the dollar sags – heading in the wrong direction. 
7. The information technology, financial and healthcare sectors outperform utilities, REITs and materials – too early to call.
8. The annual federal budget deficit approaches $1 trillion, a level unprecedented absent a recession – heading in the right direction. 
9. U.S. and global politics spark more market volatility as the “cold wars” within the U.S. and with China persist – heading in the right direction.
10. A double-digit number of Democrats run for president while President Trump is challenged within his own party – heading in the right direction.