Robert Doll, chief equity market strategist at Nuveen Investments, sees the bull market remaining intact, but leadership is likely to continue shifting from defensive to cyclical stocks. Doll told attendees at the
third annual Fiduciary Investment Research Managers Summit (FIRMS) in Boston that price-to-earnings multiple expansion probably would start to moderate going forward.

Looking at the last 40 percent upward movement in stocks, Doll noted that 30 percent came from multiple expansion and 10 percent came from earnings growth. Among the factors that he considered positive include sequestration winding down, better consumer attitudes and less bad news out of Europe.

"The number of consumers who expect to be in their current job 12 months from now is at its highest" since the Great Recession began, Doll told attendees. When people are less afraid of getting fired they are more likely to spend money.

Consumers can "grow the economy at a 2 percent to 2.25 percent rate," Doll said. What can take it higher from that level?

Energy independence, he argued. Among the benefits of less reliance of foreign energy are lower energy costs, more jobs, increased manufacturing competitiveness and a greatly improved trade balance.

Doll belongs to an informal group of non-U.S. money managers who tell him that energy independence would translate into a price-to-earnings ratio of "two or three points higher" than current levels. The probability of energy independence is "really high" in his view, although the variability is dependent on both time and politics. With a favorable political environment, it could occur in six years; with a less favorable climate, it could take a decade.

The spillover effect of less reliance on foreign energy in the manufacturing sector could be dramatic. "Natural gas [in the U.S.] is so cheap. Germany, Japan and South Korea pay three times what we pay," Doll said.

Meanwhile, Washington, D.C., arguably has never been more fractured, but that has some beneficial effects. The Federal budget deficit has been cut in half in the last 18 months, and Doll said it could be eliminated in the next three to four years.

"Bears on the deficit have been dead flat wrong," he noted. "Markets move based on things that change at the margins. That includes debt and deficits."

Corporate profit margins may stay high longer than many people think, Doll said. That's because of the major shift in corporate cost structures from fixed to variable costs.

Another positive factor for equities is the negative investor sentiment towards them. Doll noted that a recent survey found that 64 percent of investors were either skeptical or deeply distrustful of stocks. When
sentiment is that pessimistic, it indicates a major bear market is highly unlikely.