2021 will be a “great” year for the U.S. economy, predicted Bob Doll, senior portfolio manager and chief equity strategist at Nuveen.
But it will only be a “good” year for the stock market, which has seen its ups and downs lately, Doll said today when he discussed his annual predictions for the New Year.
Corporate earnings will be up 21% by the end of the year, while the stock market will be up 7%, predicted the financial thought leader. GDP will increase at a faster pace than at any time in the past 20 years, partially because of a pent-up demand from consumers. By the third quarter, all GDP losses will have been recovered and GDP will move to all-time highs, he added.
The economy will be boosted by another stimulus package that can be anticipated with the Democratic takeover of the U.S. Senate, he said.
Doll has made his annual predictions in January for 30 years. Last year, for the first time, the predictions were revised in April because of the pandemic.
Last year, “after making an all-time high on February 19, stocks collapsed 35% by March 23, making it the quickest and sharpest bear market in modern history,” Doll noted in a recent commentary.
“From there, thanks to extremely aggressive global monetary and a number of fiscal ‘whatever it takes’ policy responses, stocks climbed nearly 70%, resulting in yet another double-digit annual percentage gain for the S&P 500 Index. For the first two-thirds of the year, U.S., large-cap and growth stocks outperformed non-U.S., small-cap and value stocks. For the rest of the year, however, the latter group outperformed,” he said.
This year is different. Stock valuations were low during 2020 but are increasing, which will make it necessary for stock buyers to be more careful in their selections as the year moves forward. At the same time, inflation will begin to creep up to 2% by the end of the year, and the Federal Reserve, which has said it is not even “thinking about thinking about” raising interest rates may shift its attitude slightly, he said.
“Stocks will reach a new high for the 12th consecutive year but will fail to keep pace with the strong earnings growth,” Doll explained. “Stocks will outperform cash this year but cash will outperform Treasury bonds for the first time since 2013.”
“As the population gets inoculated and large parts of the economy reopen, a virtuous cycle of increasing consumer and business confidence should boost GDP and provide for strong corporate profit growth,” Doll said in a blog post.