Yet it may be the end of equities’ impressive run, said Doll.
“My guess is that we’re entering a period where if stocks beat bonds, it’s only because stocks are up a little and bonds are down a little,” Doll said.
When dividends are included, the S&P 500 should return around 7 percent in 2017, but better performance can be found in equal weighting, small caps, international equities, value and sectors like financials, health care and technology -- and “for the first time in a while,” active stock-picking will out perform, said Doll.
Active management tends to outshine passive indexing when small-cap and international stocks outperform their large-cap and domestic peers, according to Doll, as well as when equal-weighted indexes outperform their respective market-cap indexes.
“We’re exiting a world of disinflation or deflation or zero inflation, and we’re entering a period where we’re going to have low-to-positive inflation,” Doll said. “That’s a big change … it’s actually a portfolio manager’s dream, we’re moving the focus from beta to alpha.”
Due to the slow-moving mechanisms of the U.S. government, it may be as late as 2018 before any impact is felt from Trump policies, said Doll.
For one thing, Republicans in Congress favor a starkly different slate of tax reforms than the White House has proposed, and deficit hawks may balk at the $1 trillion in infrastructure spending called for by the president.
“Not all Republicans think alike,” Doll noted. “The House Tea Party Republicans will in no way, shape, or form say yes to the pre-election campaign rhetoric by Trump on taxes, because that rhetoric is deficit-busting.”
It’s possible that in the interim, some of the optimism stemming from Trump’s agenda will begin to fade as the year progresses, said Doll, but in the long run some version of the proposals is likely to become law.