Bob Doll, chief equity strategist at Nuveen Asset Management, said the bull market will continue for 2018 with some bumps, but argued that he is not bullish on the market.
The supposed contradiction in those two statements comes from the fact that he sees equity markets going up by single digits this year, rather than the double digits of 2017.
“If I was neutral on the market, I would be predicting a 10 percent increase (compared to the phenomenal increases experienced in 2017), so I am actually a little below neutral,” he said during a press briefing on his predictions for the coming year held on Thursday.
What he is predicting is a less-than-perfect year for 2018 compared with a near perfect year in 2017, he said. This year will be a bumpier ride with possibly three episodes of volatility but will end well. If stocks continue to increase for another couple of months, it will be the longest bull market in history.
The economy is set to perform well, Doll said, with real U.S. GDP increasing by 3 percent and nominal GDP (not adjusted for inflation) increasing by 5 percent for the first time in a decade.
Worldwide, fewer countries are in recession than has ever happened before. Despite protectionism policies in some countries and geopolitical unrest, economically “the world has never been in better shape, and it will remain that way,” he said.
Unemployment will fall to the lowest level in 50 years, while wage growth will be 3 percent, the highest since the Great Recession, he said.
Interest rates will creep up with probably three increases announced by the Federal Reserve during the year. The 10-year U.S. Treasury yield, which reached a low of 1.37 percent in 2016, will go up and could reach 3 percent.
Stocks will continue to beat bonds, Doll said. That was true in 2017 because “stocks went up a lot and bonds went up a little. This year stocks will go up and bonds will go down, but only eventually.” It is the first time in history that stocks have beat bonds for seven consecutive years.
For individual sectors, Doll said, telecommunication services, information technology and health care will outperform utilities, energy and materials in 2018.