China’s issues are typical for any emerging economy, Doll added.
The Federal Reserve has also played a prominent role in whipsawing the markets, Doll said. Risk assets sold off at the beginning of the year when the Federal Reserve indicated it might raise rates four to five times this year. There was another sell-off in February after Fed chair Janet Yellen mentioned negative interest rates.
“If you believe the Fed will increase rates four or five times, you live in La-La Land,” Doll said. “It will probably raise rates once or twice.”
As for negative rates, “the probability is zero,” given that inflation is running near the Fed’s 2 percent target.
The election is the least important thing to fixate on, Doll said. The markets don’t react as much as people think they do when there are changes in a presidential administration, and Republicans look likely to hold on to the House, which markets should favor.
Doll said recent gyrations have created a “fear funk” among investors, which creates tactical opportunities to pick up stocks and sectors that have fallen out of favor. With returns muted, he favors active management over passive.
He recommended overweighting U.S. equities by 5 points, underweighting bonds by 10 points, and keeping an extra 5 points of cash.
“I want some dry powder for the tough days,” he said.
Hazarding a guess, Doll said the S&P 500 could deliver a 7 percent total return this year.
In the longer term, a diversified portfolio may yield 4 to 6 percent yearly over the next decade, Doll said, which is still “an acceptable place to be for wealth accumulation.”