2015 Ten Predictions

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

Expect a Bumpy Road, but Equities Should Eventually Press Higher

Our 2015 predictions are based on our theme that investor sentiment would move from skepticism to optimism. That hasn’t happened yet, but we still expect it will. At this point, most of our predictions are in the early stages, but we’re heading in the right direction on several of them.

View Full Quarterly Update         Watch Video Update

01 Too Early to Call U.S. GDP grows 3% for the first time since 2005.

It’s been a slower start to the year than we anticipated, but at least some of the recent weakness can be attributed to the rough winter and the port strikes. Given strong employment trends, we still think we have a good shot at seeing 3% growth this year.

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

Inflation levels have been confusing so far this year. Lower oil prices have suppressed headline inflation while core inflation remains well contained (the February core consumer price index came in at a modest 1.7%).1 We are starting to see signs of wage growth. Several retailers, such as Walmart and McDonald’s, have announced pay increases and average hourly earnings have moved slightly higher. The growth in new jobs and the decline in the unemployment rate are also putting upward pressure on wages.

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

Interest rates have not yet advanced. Both the 10-year Treasury yield and 2-year Treasury yield ended the quarter lower than where they were at the beginning of the year.2 Our expectation that the economy will improve should lead to a corresponding rise in bond yields. We also expect the Fed will begin raising rates later this year. Given that the fed funds rate is at zero, the central bank has a great deal of flexibility.

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

When we initially made this prediction at the end of 2014, it was actually an out-of consensus call. Now it is the lone prediction for which we can already make a final call and place in the “correct” category. The ECB’s launch of its massive quantitative easing program in January should provide much-needed support for the eurozone, but we still believe Europe needs some serious structural reforms.

05 Too Early to Call The U.S. contributes more to global GDP growth than China for the first time since 2006.

This was another non-consensus prediction. While it is still early, it does appear that Chinese growth may slow to the point that we will get this one correct as well. Most data from China show that economic growth is weakening (in March, the Chinese Manufacturing Purchasing Managers Index fell to 49.2%).3 We expect Chinese growth in 2015 to be slower than the officially-reported level of 7% it reached in 2014.

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 haven’t held up, but the dollar has certainly advanced, with the U.S. Dollar (DXY) Index up 9.0%.4 What would “good” look like in the seventh year of a bull market? We don’t expect stock prices to rise as dramatically as in recent years, but as long as equities post a positive gain for the year, we would qualify it as a good year.

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

This prediction is definitely on track, with the three sectors in our favored category posting an average increase of 2.9%.4 Those we feel are less favorable are down 2.3%.4 Strong unit growth and healthy demand have helped the technology and health care sectors, while lower commodity prices have hurt energy and materials. Regarding the two income-oriented sectors we selected, telecommunications has been handily outperforming utilities.

08 Right Direction Oil prices fall further before ending the year higher than where they began.

We saw a precipitous drop through January before prices began stabilizing. West Texas Intermediate oil prices began the year at $53.3 and fell to $45.2 in early March before ending the quarter at $47.6. Oil prices are likely to remain volatile, and we could see a further pullback (particularly if Iranian production increases as a result of ongoing negotiations). At some point, however, we expect reduced supply and increased demand, which should cause prices to end the year higher.

09 Too Early to Call U.S. equity mutual funds show their first significant inflows since 2004.

We haven’t seen significant inflows into equity mutual funds so far this year. Through February, equity funds have attracted a relatively modest $3 billion.5 We expect to see more confidence, less skepticism and decent market performance as the year progresses, which should prompt more investors to consider equities.

10 Too Early to Call The Republican and Democratic presidential nominations remain wide open.

The GOP field is starting to shape up and the list of prospective candidates seems to grow every day. On the Democratic side, Hillary Clinton remains the presumptive front runner, but she faces some hurdles. Support for her seems to be a mile wide and an inch deep, and as the latest imbroglio over her emails shows, she will remain a constant source of Republican scrutiny.

1 Source: Bureau of Labor Statistics
2 Source: Morningstar Direct, Bloomberg and FactSet as of 3/31/15
3 Source: Chinese National Bureau of Statistics
4 Source: Morningstar Direct, Bloomberg and FactSet as of 3/31/15
5 Source: Morningstar Direct.

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 – June 2015

Bob discusses where he believes the equity markets may head.

Watch video

What to Expect for the Rest of 2015?

What Should You Expect for the Rest of 2015?

Bob Doll gives an update to his 2015 Ten Predictions.

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