The stock market will be a choppy and frustrating at times, but it will be a “pretty good” year for equities and the economy.

That’s the theme of the just released Nuveen’s 2019 Ten Predictions report.

The report warns that stocks will have extended runs and declines this year but ultimately “bullish factors will overpower the bearish ones.”

The S&P will be up about 8 percent while bonds will continue to have little or no growth. Markets and the economy will face many challenges. There will be political turmoil, with divided government resulting in no substantive legislative action, along with a trillion-dollar deficit. Markets will remain volatile and the potential for a trade war will continue, the report continued.

All of this, the report warned, will create “a difficult environment for investors.” However, “we think it is fairly certain that there the U.S. will not fall into recession in 2019.” Indeed, the report said GDP growth will be between 2 and 2.5 percent, which is still above the long-term historic rate of return.

“The concerns about the market and the Fed pushing us into a recession got overdone in the fourth quarter,” said the report’s author, Robert C. Doll, senior portfolio manager and chief equity strategist with Nuveen. He said the December market selloffs created buying opportunities.

“There will be some more upside in 2019, but I think it is going to be bumpy,” he added. Doll predicts that the S&P 500 will end the year at 2,650 and, with dividends, will be up some 8 percent.”

That, he notes, is positive but below the historic 9 percent returns of the stock market. “We’ll be up for sure, but I am not overly rosy in my outlook,” Doll says.

The economic expansion will continue this year but at a slower pace than in 2018. “Despite (or maybe because of) that, if this expansion lasts until June 2019, it will become the longest ever economic upcycle,” according to the report.

Why will the equities party continue?

The bloodletting at the end of the year created opportunities, according to the report.

“Valuations have improved due to the selloff, suggesting more upside potential for prices,” the report said. Doll also said that bonds, which closed the year flat, are likely to continue their sluggish ways this year.

Why is the upside stock market cycle still operating and why is the economy not headed for a recession this year?

Doll cited several factors. “For instance, the U.S. consumer is in fantastic shape. He adds that wage growth has begun to pick up, the saving rates are good and, with consumers constituting about 70 percent of the economy, “that will help lead the earnings story.”

Another factor keeping the economy growing will be the logic, or illogic, of a trade war. The dispute will eventually lead both nations to find compromises, Doll predicted. “Both Trump and the Chinese leadership need a win,” he said.

What should advisors do?

Doll, an active manager, says financial professionals should prepare for “choppy markets, but also for a rally and no recession.” He said advisors should focus more “on alpha, not beta. Security selection is becoming far more important than just what asset class you own.”

He also says advisors should diversify across asset classes and geographies. He argues that one just can’t buy large-cap U.S. equities. “You once did well with that strategy, but now you have to be more diversified,” Doll says.

Watch inflation carefully, he adds, warning that the Fed hasn’t necessarily solved the inflation problem. And consider “an absolute return strategy to compliment market exposures.” He said the latter is based on the recognition that returns in the stock market in this environment are often “anemic.”