Nuveen’s chief equity strategist and senior portfolio manager Bob Doll is relatively optimisticin his top 10 predictions for investorsthis year.
Although he admits, like many strategists, that “2020 has already ‘borrowed’some of 2021’s returns,” Doll sees roomfor more gains in the year ahead.
“Stocks should get a boost from aneconomic recovery combined with continued hyper-accommodative monetarypolicy, fiscal support for households andbusinesses and negative real returns ongovernment bonds,” writes Doll.
He refers to 2020 as “a year we all
wish we could forget,” and adds: “The
unprecedented coronavirus pandemic
But stocks staged an unexpected
strong rally after plummeting in March,
ending the year with a gain of slightly
more than 16%.
Doll expects stocks will set anotherrecord high in 2021, marking a 12th consecutive year of gains; but they’ll also lagstrong earnings growth, with small-capvalue and non-U.S. equities outperforming large-cap, growth and U.S. stocks.
As he noted in his mid-April revised2020 outlook, Doll expects health careand financials to outperform energy andutilities. Financials failed to do that lastyear, when utilities outperformed financials and energy equities.
Doll says the biggest risk for financial markets in 2021 will be a greater-than-expected increase in inflation andinterest rates. He anticipates that stockswill still advance, but will underperformearnings growth because of increases ininflation and interest rates.
Here are those predictions;
1. U.S. real GDP increases at its fastestpace in 20 years.
2. Inflation approaches 2% as the10-year U.S. Treasury yield reach-es 1.5% (10-year yields are around
3. The U.S. dollar sinks to a five-yearlow. (The U.S. dollar index, DXY,fell 7% in 2020.)
4. Stocks reach a new high for the 12thconsecutive year, but fail to keeppace with strong earnings growth.
5. Stocks outperform cash, but cashoutperforms Treasury bonds for thefirst time since 2013. Doll expectsU,.S. government bonds will continue to have negative yields, afteradjusting for inflation.
6. Value, small and non-U.S. stocks(especially those in emerging markets), big and U.S. stocks.
7. Health care and financials outperform energy and utilities.
8. U.S. federal debt rises to more than100% of GDP on its way to an all-time high.
9. The U.S./China cold war continues,but the conversation becomes quieter and more multilateral.
10. Despite polarization, PresidentBiden, Sen. McConnell andmoderate forces achieve somecompromise legislation. (BothDemocrats won in GeorgiaSenate race giving the Democratsthe majority.)
By Bernice Napach and Jeff Berman
Bob Doll’s 10 Predictions for 2021
Stocks will keep rising despite having “borrowed” some of 2020’s returns,
Nuveen’s chief equity strategist says. Schwab’s Sonders gives her outlook, too.