Bob Doll’s 10 predictions for 2020

Nuveen’s chief equity strategist, Bob Doll, is heading into 2020 with a generally bullish outlook, despite the quirky and unpredictable influences of a presidential election.

According to his annual forecast this year, Mr. Doll doesn’t expect the stock market to post another double-digit gain, and thinks the non-U.S. market will take the lead.­­

He also believes 2020 is the year in which active manage­­rs will shine.

1. The world avoids recession in 2020 as U.S. GDP grows over 2% and global GDP grows over 3%.

“Aside from 2019’s inverted yield curve, which has passed, there are plainly no signs of a recession. Period.”

2. Inflation and the 10-year U.S. Treasury yield end the year above 2% as the Fed stays on hold through the election.

“We think rates and inflation will remain low but will creep higher. The Fed has pleaded with the world for higher inflation and we think they’re going to finally get it.”

3. Earnings fall short of expectations, partially due to rising wages.

“Consensus earnings estimates for next year is up 9%, which was similar to what they were coming into 2019 and they ended up at 1%. Our best guess is 2020 will be plus 6%, because the economy is doing better, and corporations should have better revenue growth.”

4. Stocks, bonds and cash all return less than 5% for only the fourth time in 25 years.

“This is our riskiest prediction and it’s a little provocative. It’s hard to see significant upside in the stock market because of what I said about earnings. The market has already priced some of the good news in.”

5. Non-U.S. stocks outpace U.S. stocks as the dollar retreats.

“In the last decade, U.S. stocks have beaten non-U.S. stocks by a lot, but valuations are more favorable outside the U.S. The trade deal is good for global growth, and the global interest rate differential is moving against the U.S., which makes the U.S. less interesting. 

6. Value and cyclicals outperform growth and defensive stocks.

“Around Labor Day we began to see the switch away from momentum and growth and toward cyclical stocks and we think that continues. Improving growth favors value and cyclicals, and that’s what we see in 2020.”

7. Financials, technology and health care outperform utilities, real estate and consumer discretionary.

“This is our annual sector call. Banks certainly have better balance sheets, technology is one of the most global sectors with generally strong balance sheets, and the biggest risk to health care is if a progressive Democrat gets elected President.”

8. Active equity managers outperform their indexes for the first time in a decade.

“There are conditions when active managers tend to do better: When international outperforms the U.S., when equity returns are relatively low, when value beats growth, when correlations are low and when small stocks beat big stocks. When that list happens, active managers tend to outperform.”

9. The cold wars within the U.S. and between the U.S. and China continue.

“Within the U.S., we’re not getting along very well. Politically and economically the divides are significant. One positive is that in the last three years wages at the low end have been growing faster than wages at the high end.

In terms of China, there’s hope for a small-ball trade deal, but there are still many other issues.”

10. The U.S. concludes a tumultuous political year with a status quo election.

“The president wins re-election, Republicans hold the Senate, and Democrats hold onto the House. If there’s no recession in an election year and no credible primary challenger to the president, the incumbent usually wins.”

[More: Bank of America: Market is primed for a ‘melt-up’ in the first quarter]