Doll Scores 50/50 on 2023 Predictions

The market prognosticator said the predictions for 2023 were among his ‘worst years,’ after a widely predicted recession did not materialize.

Bob Doll, the CIO of Crossmark Global Investments, said five of his 10 annual investment predictions for 2023 came true amid what he called a challenging year for investors.

Doll said his predictions for 2023 produced one of his “worst years,” below his average of 7.0 to 7.5 over 30 years of predictions.

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“Multiple expansion despite flattish earnings confounded most investors even as a much-anticipated recession did not materialize,” Doll wrote. “Investors enjoyed falling long-term interest rates in the back part of the year, even as the Fed raised rates multiple times reaching the 5 1/4% level.”

Half Wrong

The predictions Doll got wrong included:

  • Incorrect: Doll predicted a shallow recession in 2023, which ultimately did not occur. Stronger-than-expected consumer sentiment, driven by a robust, yet weakening labor market and leftover cash resources from the COVID-19 pandemic period allowed for sustained economic growth, according to Doll’s report. Yet cautionary signals from lead indicators of recession, such as the yield curve and money supply, persisted through the end of the year.
  • Incorrect: Doll said a major asset class would not change up or down by a double-digit percentage. In reality, stocks catapulted higher than that marker. The surge was led by the “Magnificent 7” stocks from Apple, Microsoft, Google, Amazon, Nvidia, Meta and Tesla, he noted.
  • Incorrect: Doll guessed that energy, consumer staples and financials would outperform utilities, technology and communication services, on the premise that value beats growth. But the prediction, he noted, was “way off the mark.” Instead, growth beat value, with technology and communication the year’s best-performing two sectors. Meanwhile, energy and consumer staples were down for the full year.
  • Incorrect: Doll’s expectation that the average active equity manager would outperform the index in 2023 was incorrect. The dominance of the “Magnificent 7,” coupled with underperformance by average stocks and a shift toward more equally weighted portfolios by active managers, disproved this prediction early in the year.
  • Incorrect: Doll’s projection that international stocks would outperform those from the U.S. for the second year in a row fell short due to the notable outperformance of mega-cap growth stocks in the U.S., coupled with a dollar rally and economic challenges in various parts of the globe.

Half Right

Doll did get 50% of his predictions correct, which, though lower than his usual average, showed some strong prescience in areas where others got it wrong. Those included:

  • Inflation fell substantially, in part due to stronger interest rates, but remained above the Federal Reserve’s target of 2%;
  • The federal funds rate reached 5% and remained there for the balance of the year;
  • Earnings fell short of expectations due to cost pressures and revenue shortfalls;
  • India surpassed China as the world’s largest population and is the fastest-growing large economy; and
  • A double-digit number of candidates announced they would run for U.S. president.

Doll will release his 2024 outlook on December 29, he wrote. One big question is whether the consensus view of the double-digit earnings growth, no recession and Fed rate cuts commencing early in the new year can all come together.

“We are dubious that all these good things can happen simultaneously,” Doll wrote.

American Students Score Poorly in Financial Literacy

An inaugural study by the SPARK Institute is an early step in engaging the retirement plan community to teach basic finance.

America’s high school and college students are lagging in terms of basic financial literacy, according to a new study from the SPARK Institute and Corporate Insight Inc.

The research, released Friday and intended for annual publication, found that among 956 high school students and 910 college students, many showed limited knowledge of personal financial topics, and the majority showed little faith in school systems to teach them about finance.

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Among five multiple choice questions in the survey—covering credit scores, loans, retirement savings, investing and interest accrual—only 39% of the college students got more than half of the answers correct, while high school students fared slightly worse, with 37% getting at least half right.

Looking Ahead

The survey is an early step in what SPARK [Society of Professional Asset Managers and Recordkeepers] Institute President Tim Rouse says will be a core focus for the industry group in the years ahead.

He notes that most of the member firms in SPARK have “independent financial literacy programs,” which prompted SPARK to look for ways to combine forces. One early step was conducting research on young people’s financial literacy.

“We wanted to have a baseline of what high school and college students know when it comes to financial literacy,” Rouse says.

The institute will be bringing the findings to policymakers in hopes of implementing programs that can engage both public and private actors, Rouse says. One group he noted in particular is the Financial Literacy and Education Commission, run out of the U.S. Department of the Treasury and tasked with developing a national strategy on financial education.

More immediate potential vehicles for growth, however, are state governments, many of which are already either mandating or providing financial literacy programming to students, Rouse says. SPARK recently spoke with policymakers from Maine, who introduced a law to have financial literacy taught in high school and some levels of middle school.

“Ideally, the goal here is that we can help support those efforts at the state level to get this type of curriculum into the school,” he says.

Rouse says SPARK also envisions a role for member groups in “training the trainers”—providing teachers with the financial education and tools they need to teach students.

“One of the things we found out in the conversations with the state of Maine is that a lot of teachers are not confident that they can teach these courses,” he says.

Rouse notes that SPARK member groups are well-positioned to help educate teachers, both through expertise and via financial education tools and products in which they’ve invested for their businesses.

Currently, 25 states guarantee a “standalone personal finance course” for high schoolers, according to a tracker by Next Gen Personal Finance. Only eight states have fully implemented such an offering, with the other 17 in progress, according to the nonprofit that provides personal finance educational programs.

Education Matters

The SPARK and Corporate Insight researchers found some bright spots for high school students, as those planning to go to college tended to do better. But students who do not plan to go to college did not fare well, indicating an issue when they budget, plan and save in their working lives, according to the report.

“The financial services industry spends significant resources on educating employees on how to save and invest for the future,” said Snezana Zlatar, chair of SPARK’s financial literacy committee, in a statement accompanying the report. “However, there is not enough focus on providing education to high school and college age students build good financial habits early in life.”

The education level of a students’ parents also played a role: Students with parents who attended college got more than half of the answers correct, at a rate of 70% for high school students and 66% for college students. Of students whose parents did not attend college, only 30% of high schoolers got half of the answers correct, and 58% of college students got half right.

“You’re going to start to see this growing gap between the more affluent and the less affluent, which is a big concern,” Rouse says. “Poor minorities are likely to suffer more, simply because their parents aren’t in the position to provide the right information, and they’re not getting it from schools.”

Behavior to Match

The majority of college students (55%) have plans for a “large expense” in the near term, but a number of them are not exhibiting the best behaviors to meet that goal, according to the study.

Over the past six months from when the survey was taken in July, 29% of college students surveyed reported overdrafted their checking accounts, and 16% said they missed credit card payments.

When asked to do a self-assessment of their financial know-how, just 18% of high schoolers and 26% of college students said they have a “somewhat high” or “very high” knowledge of finance. Looking ahead, only 46% of high schoolers and 55% of college students marked that they know enough to reach their financial goals.

Finally, the researchers asked students about the schools themselves. In that case, just 11% of high schoolers and 18% of college students said their schools did “well” or “extremely well” in preparing them to make personal finance decisions.

The survey was conducted by the SPARK Institute in partnership with Corporate Insight Inc. in July, examining aptitude, behavior and confidence levels of 956 high school students and 910 college students regarding foundational principles of personal financial management (the ABCs of Financial Literacy).

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