Best bull market in history?

Top strategist Bob Doll looks at first quarter for clues to continuing boom

By Jeff Benjamin

Apr 20, 2015 @ 12:01 am EST

Bloomberg News

In a first-quarter checkup on his 2015 economic predictions, Bob Doll, chief equity strategist at Nuveen Asset Management, is giving himself a passing grade, while betting on a lot of help from consumers to carry through the rest of the year.

“It's my contention that this is the least believed bull market in the history of our careers,” he said. “And I believe that, in the end, consumers will come around because of the improvements in the job market, their improved net worth and the benefits of lower energy prices.”

Here, then, are his predictions and how they are playing out after one quarter.

• On his prediction that the U.S. economy will grow by more than 3% for the first time since 2005, Mr. Doll confessed, “It will be hard to get that one right.”

“I think 2.5% is in the bag, but 3% might be stretch,” he added. “The consumer is still what I feel good about helping us get to that growth level.”


On the call that core inflation remains contained and wage growth will pick up, Mr. Doll is giving himself a passing grade, even though wage growth has been flat.

“I think I'll end up getting that one right,” he said. “It will be a confusing year for inflation, but there's no question that wage growth is beginning to show. I don't expect a big number, but its head is starting to pop up.”

• Mr. Doll is hemming and hawing a bit with regard to his call that the Federal Reserve will kick off its first interest rate hike since 2006.

“Barring disaster, the Fed will raise rates this year,” he said. “We got to zero rates because of an emergency. The emergency has passed, and I think they need to move rates from zero to low levels.”

As far as when that might happen, Mr. Doll is looking past June and tilting toward a September hike at the earliest.

• On the European Central Bankers' long-awaited quantitative easing program, which kicked off in January, Mr. Doll nailed it.

“That was a really hard one to call,” he said. “We waited four years for the ECB to step up, and I think it's one of the reasons Europe is doing better now. They're still way behind us, but things have improved.”

• Mr. Doll will need more help from consumers to get the call correct that the U.S. will contribute more to global GDP than China for the first time since 2006. For that to happen, the Chinese economy, which has been growing at a 7% annual clip, will need to slow down this year to around 5%.


“I think we're going to get that one right, because I think China is slowing more than the consensus thinks it is,” he said. “If China grows by 5% this year, we only have to grow by 2% or 2.5%.”

• Going for a record seven consecutive years of positive returns for the S&P; 500 Index was a large part of the motivation behind the call for another good year for U.S. stocks. But Mr. Doll is quick to point out that positive only has to be slightly up in order for his prediction and the record to count.

“A good year for stocks for me is up, period,” he said.

Mr. Doll said he believes some of the stock market's volatility this year can be attributed to inflated earnings estimates, which he expects to fall back in line for the second half of the year, triggering more investor optimism.

• Mr. Doll is on course with his call that the technology, health care and telecom sectors will outperform utilities, energy and materials sectors this year.

So far, the three favored sectors have combined for a 2.9% gain, compared with a combined 2.3% gain for the less favorable categories.

“We are right in spades, so far,” he said.

• The drop in oil prices that he called for has already come, but the price will have to stay at current levels or climb higher for Mr. Doll to get it right that prices will finish the year higher.

Oil started the year at $53 a barrel, then fell to $45 in early March, before ending the quarter at just over $47.

“My view is I don't think oil stays where it is today,” he said. “I think we'll have another sell off before we get another rally, and I see more supply coming off the market.”

• Calling for U.S. equity mutual funds to see their first significant inflows since 2004 fits into Mr. Doll's category of “wildly bullish” support of active management.

The most recent data show actively-managed equity funds attracting a modest $3 billion this year through February.

“For this to happen, the equity market has to be okay, and confidence has to pick up,” he said. “It will take active managers doing much better, which they have been doing.”

• Slightly off the economic focus, but very much in the news, Mr. Doll is sticking with his call that at year-end, both the Republican and Democratic presidential nominations will remain “wide open.”

“We know there will be 100 people running on the Republican side,” he said.

But, in terms of Hillary Clinton having already announced her candidacy as a likely unopposed Democratic contender, Mr. Doll said, “The support for Hillary is a mile wide but only an inch deep.”

“The Democratic party is really nervous about that, because she's weak, and she has baggage,” he added. “She's still the odds-on favorite, but it won't be the coronation or the cake walk that her poll numbers suggest.”

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