The year 2013 is the year of the Nervous Bull, at least according to Bob Doll
, chief equity strategist and senior portfolio manager at Nuveen
The noted equities cheerleader sang this song during his presentation of his 2013 investment outlook at the Tiburon CEO Summit held at the Ritz Carlton Battery Park in downtown Manhattan.
His outlook argued that we were close to experiencing an ideal set of conditions for equities, including various positive indicators for the economy.
However, he urged, what is good for economy, and good for the stock markets, are not identical. There are subtle differences between the two sets of factors, he said. Once it is categorically clear that we have a strong economy, the debate on equity investing and what the Fed should do will end, Doll explained.
Doll said that the environment we are currently in is not that different from a perfect set of conditions for the economy.
Nonetheless, he said, there are still a lot of "nervous bulls" out there, with equity prices climbing the "wall of worry."
Factors contributing to market uncertainty include risk on risk alternations, the sluggish labor markets and likewise slow healing of housing. Other factors include the European recession and the slowdown in the Chinese economy.
The economy, Doll explained, is experiencing a tug-of-war between such forces as the trend towards de-leveraging and the assorted government polices aimed at addressing inflation.
In fact, he said, a major factor behind the anime recovery is the movement by consumers and others to pay down their debts. Paying down debts keeps dollars from entering -- and doing work -- within the economy.
Doll warned that policy and business leaders need to make sure that deflation doesn't take over. If everyone devotes all their money to paying down debts, we could enter a recession again.
Doll also anticipated a "near muddle-through economy and a grind higher equity market."
The factors included near-term U.S. political uncertainty, further monetary easing in Europe and Japan, further private sector healing, and emerging market economic improvement.
A key question for Doll was: Will companies start to spend their cash? Can we unlock the massive positive private savings rate in corporate America? There will be some spending, he forecast, but there would still be a "ton of cash" sitting on the sidelines.
Positive factors included slowly improving employment, a stronger corporate sector and stable cost structure as well as lending standards easing.
Negative factors, though, included continued uncertainty fears, fiscal drag and poor real wage growth. Consumer de-leveraging was likely.
Consumers are still asking themselves some important questions, he said, like "will I have my job six months from now" and "how is my wealth (my house, stocks, bonds) doing?"
Consumers feel better, but are still fragile, he said.
Other predictions Doll made during his presentation included Europe starting to emerge from its recession in the medium-term somewhat as well, a manufacturing resurgence thanks to low energy prices and another year of equity all-time highs.
He did allow himself one "lunatic" prediction, that U.S. legislators would agree this year to roughly $2 to $3 trillion ten-year budget deal. The reason for his optimism in this area? Legislators passing the $650 billion tax package at the beginning of 2013.
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