U.S. and global economic growth will improve modestly, said Bob Doll, Nuveen Asset Management's senior portfolio manager and chief equity strategist, in his 10 Predictions for 2017, released Thursday.
While the aging business cycle, rising interest rates, climbing dollar and slow productivity growth present headwinds, consumer and business confidence improved following the Nov. 8 election, and Mr. Doll expects real GDP growth of roughly 2% in 2017.
Mr. Doll also expects the U.S. dollar to climb further in 2017 and reach parity with the euro, and sees the lowest U.S. unemployment level in 17 years.
In 2016, new jobs averaged 185,000 monthly. Mr. Doll expects the average to remain above 150,000 in 2017. He also expects the current 4.6% unemployment rate to drop further (to less than the 4.4% rate of May 2007) and average hourly earnings growth to exceed 3.1%.
Mr. Doll also predicts that the U.S. Treasury yield will increase for a third consecutive year, which hasn't happened in 36 years. He also believes the Federal Reserve will raise rates as least twice. While the Fed has discussed as many as three rate hikes, Mr. Doll said during a breakfast Thursday that he is not sure there is going to be enough economic strength or inflation to warrant three hikes.
Mr. Doll's other predictions for 2017 include:
- Stock prices will hit their 2017 high in the first half of the year;
- For the first time in 20 years, stocks will outperform bonds for the sixth year in a row, while volatility will rise for both asset classes;
- Small-cap, cyclical and value stocks will beat large caps, defensive and growth;
- Financial, health-care and information technology sectors will outperform energy, utilities and materials;
- Active manager performance will improve as equity inflows rise;
- Nationalist and protectionist trends will continue in 2017 as pro-domestic policies are pursued across the globe.
- Initial high optimism surrounding President-elect Donald Trump's agenda will fade due to the slow legislative process. While legislation could be passed in 2017, it wouldn't take effect until 2018.
Mr. Doll's predictions, and how he fared in 2016, are available on Nuveen's website.