2015 Ten Predictions

Quarterly Update from Bob Doll
Robert C. Doll, CFA
Senior Portfolio Manager,
Chief Equity Strategist
Nuveen Asset Management, LLC

Equities Should Stabilize and Improve...Eventually

Equity markets took a hit in the third quarter, and while we think prospects still look bright, investors may need to be patient. Improvements in global economic growth, better earnings results and clarity around Federal Reserve policy should eventually help markets regain their footing.

View Full Quarterly Update

01 Wrong Direction U.S. GDP grows 3% for the first time since 2005.

The final reading on second quarter gross domestic product growth showed that the economy expanded by an annualized 3.9% pace.1 This means that during the first half of the year, economic growth averaged 2.3%.1 We expect economic growth will accelerate from this level, but probably not by enough for us to get this prediction correct.

02 Right Direction Core inflation remains contained, but wage growth begins to increase.

Core inflation levels have remained quite low so far this year — a key reason cited by the Fed in its decision to not raise rates in September. Wage growth hasn’t been accelerating quickly, but the monthly employment reports have been showing slow-but-modest levels of advancement. The year-over-year rate in August came in at 2.2%.2

03 Too Early to Call The Federal Reserve raises interest rates, as short-term rates rise more than long-term rates.

This prediction remains a wildcard. At the beginning of the year, we pegged June or September as the most likely liftoff time for the Fed, but those dates have come and gone. Janet Yellen’s recent comments suggest we may yet see an increase this year (if we had to guess, we think December could be likely). Interest rates have moved unevenly this year, but we are expecting yields to rise.

04 Correct The European Central Bank institutes a large-scale quantitative easing program.

After launching its new easing program in January, the European Central Bank has remained accommodative. The latest signals from ECB officials suggest they are concerned about deflation risks and could engage in yet more easing.

05 Right Direction The U.S. contributes more to global GDP growth than China for the first time since 2006.

When we made this prediction at the beginning of the year, we expected China’s economy would slow, but we never imagined it would be this dramatic. Consumer spending is slowing notably (the latest reading of year-over-year vehicle sales shows a 3.3% decline).3 The industrial sector is also under pressure, as profits fell 8.8% in August compared to a year earlier, the largest decline since records started being kept four years ago.4

06 Too Early to Call U.S. equities enjoy another good yet volatile year, as corporate earnings and the U.S. dollar rise.

Corporate earnings have been uneven, but have been growing this year. The dollar has been volatile, but has trended higher in 2015 (the U.S. Dollar Index (DXY) is up 6.7% for the year).5 Given the August sell-off it will be a tough climb to make 2015 the seventh consecutive year of gains for U.S. equities, but we’re not ruling it out yet.

07 Right Direction The technology, health care and telecom sectors outperform utilities, energy and materials.

If we could score a prediction as “most correct,” this one would be it. Technology and health care are among the best-performing sectors this year, while energy and materials have been the worst.5 Although utilities experienced a bounce last quarter, that sector still lags telecommunications for the year. To date, our favored sectors are down 3.0%, compared to a loss of 14.5% for our least favored.5

08 Too Early to Call Oil prices fall further before ending the year higher than where they began.

Concurrent with the equity market sell-off, oil prices plummeted in August, with West Texas Intermediate prices hitting a low of $38.5 Prices have climbed a bit since then to $45, which is still lower than the beginning-of-year price of $53.5 Given soft demand and increasing production, it’s hard to make a case that oil prices will rise significantly any time soon, but we expect volatility to continue in both directions.

09 Wrong Direction U.S. equity mutual funds show their first significant inflows since 2004.

In harmony with our seventh prediction, this is the one we’re likely to get the “most wrong.” Equity flows have been negative in 2015.6 While we expect that will eventually change, it will probably take some time.

10 Right Direction The Republican and Democratic presidential nominations remain wide open.

If anything, the path of next year’s election has become murkier as 2015 has progressed. Donald Trump’s status as the GOP front-runner has started to fade and Hillary Clinton’s poll numbers have come under pressure. If you count yourself among those who enjoy political theater, the next year promises to be an entertaining one.

1 Source: Commerce Department
2 Source: Bureau of Labor Statistics
3 Source: Cornerstone Macro
4 Source: Chinese National Bureau of Statistics
5 Source: Morningstar Direct, Bloomberg and FactSet as of 9/30/15
6 Source: Morningstar

Nuveen 2015 Mid-Year Equity Outlook Portfolio

Subscribe to Bob Doll's
Weekly Commentary

Hear about the latest developments in the equity markets each week.

Follow @BobDollNuveen on Twitter for up-to-date insight on the equity markets

Market Update with Bob Doll –
September 2015

Bob discusses where he believes the equity markets may head.

Watch video

A Word on Risk
The views and opinions expressed are for informational and educational purposes only as of the date of writing and may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The information provided does not take into account the specific objectives, financial situation, or particular needs of any specific person. All investments carry a certain degree of risk and there is no assurance that an investment will provide positive performance over any period of time. Dividends are not guaranteed. Prices of equity securities may decline significantly over short or extended periods of time. Debt or fixed income securities are subject to market risk, credit risk, and interest rate risk, call risk, tax risk, political and economic risk and income risk. Interest rate risk, as interest rates rise, bond prices fall. Investors should contact their tax advisor regarding the suitability of tax-exempt investments in their portfolio. If sold prior to maturity, municipal securities are subject to gain/losses based on the level of interest rates, market conditions and the credit quality of the issuer. Income may be subject to the alternative minimum tax (AMT) and/or state and local taxes, based on state of residence. Income from municipal bonds held by a portfolio could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. Below investment grade or high yield debt securities are subject to liquidity risk and heightened credit risk. Non‐U.S. investments involve risks such as currency fluctuation, political and economic instability, lack of liquidity and differing legal and accounting standards. These risks are magnified in emerging markets. Commodity futures and forward contract prices are highly volatile. Investments in commodities may be affected by overall market movements, changes in interest rates, and other factors such as weather, disease, embargoes, and international economic and political developments.

Nuveen Asset Management, LLC is a registered investment adviser and an affiliate of Nuveen Investments, Inc.

Not registered?

Register for access to investment team commentary, detailed portfolio information, and other advisor resources. For instant access, register now.

Your Contacts

Our goal is to deliver lasting value to our clients. For assistance, please call or email our advisor service team or contact your personal Nuveen Service Team.

Log in to nuveen.com to access your personal Nuveen Service Team.

Financial Advisors


Registered Investment Advisors


Account Access

For more information on Mutual Fund Vision, FAN Mail, or accessing client accounts, please visit our advisor account access page.

Advisor Access

Investor Access