Tags: Doll | Stock | Volatility | Half

Bob Doll: Hold on Tight! Stock Volatility Looms

By    |   Tuesday, 01 July 2014 09:07 PM

Bob Doll's widely followed forecast for the second half of 2014 calls for bonds to reverse their first-half strength, for stocks to be more volatile and for old-fashioned stock selection to pay off for smart investors.

Doll, chief equity strategist at Nuveen Asset Management, updates his annual crystal ball from January each year at the mid-point at the end of June – warts and all – something some other market forecasters do not relish doing.

The jury is still out on some of his January calls, he acknowledged on his Nuveen blog.

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

Doll had predicted the U.S. economy would expand by 3 percent led by gains in housing starts and private job growth. “Following such a weak first quarter, achieving 3 percent growth for the year will be tougher, but we do expect second quarter growth to approach 4 percent and the second half of the year to be relatively strong as well,” he says now.

Also still too early to call was his January prediction that 10-year Treasury yields would move toward 3.5 percent as the Federal Reserve wraps up its quantitative easing. Doll suspects yields will climb in coming months.

Doll is still looking for U.S. stocks to finish in the black in 2014 year despite his call for a 10 percent correction. “Equities are certainly off to a good year, advancing 7.2 percent to date. So far, we have seen two corrections of over 5 percent this year (in January and in April) but have not experienced a 10 percent one.”

He predicted at the start of the year that active managers would outperform index funds in 2014, and is sticking to that call despite inconclusive results to date.

“In large-cap U.S. equities, the trend of active managers outperforming started to emerge in July of last year. So far, results have been uneven this year, but the most recent data shows improvements in relative performance for active managers, so the fate of this prediction remains to be seen.”

So far, Doll is right on the money with his January call that the dollar would grow stronger, and that energy production and manufacturing would grow in 2014.

He acknowledged a couple of his 2014 calls are headed in the wrong direction. One was that cyclical stocks would outperform defensive stocks this year – something that has not happened yet.

The other wrong call so far was for commodities, including gold, to fall. “Commodities prices as a whole are higher for the year, and although gold was essentially flat for the second quarter, prices are still higher year-to-date thanks to the gold price spike during the height of the Ukraine crisis. We still think prices will fall over the coming months,” he predicted.

At CNBC, Executive News Editor Patti Domm said some experts are looking for a rocky second half for stocks.

“Analysts say the market may begin to respond to the idea that the Fed is going to raise interest rates, as its quantitative easing program comes to an end,” she wrote. “There are also some concerns that inflation could pick up more than the Fed is predicting and force its hand on rate hikes sooner than expected in 2015.”

“The market is very resilient,” Steve Krawick, president of West Chester Capital Advisors, told Bloomberg. “We realize the fact that valuations are not cheap, but that doesn’t translate into the end of the bull market.”

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

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Nuveen strategist Bob Doll's widely followed forecast for the second half of 2014 calls for bonds to reverse their first-half strength, for stocks to be more volatile and for old-fashioned stock selection to pay off for smart investors.
Doll, Stock, Volatility, Half
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2014-07-01
Tuesday, 01 July 2014 09:07 PM
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