Nuveen’s Bob Doll Forecasts Trends for 2013

Cautious optimism was the watchword for the 2013 economic outlook, according to Bob Doll, chief equity strategist of Nuveen Asset Management.

Doll, also senior portfolio manager, predicted the U.S. will face a “muddle-through” economy and “grind-higher” equity market on the path to new all-time highs. For the seventh year in a row, he expects nominal growth—real growth with inflation factored in—to remain below 5%.

“Our somewhat constructive outlook is not driven by expectations for a strong acceleration in global growth, but rather a modest improvement leading to increased business spending, which will make the recovery broader and more sustainable than has been the case since the Great Recession ended,” Doll said. 

Life expectancy is the first thing an investor facing retirement should think about, Doll told PLANADVISER.  A 65-year-old might have a couple of decades to plan assets for, so higher exposure to equities is needed, rather than just remaining conservatively invested in fixed income.

As Doll’s forecast for the equities market is a positive one, with U.S. stocks hitting record highs as they advance for the fifth year in a row, some asset allocation in equities is key for investors nearing retirement, according to Doll.

After two years of underperformance, U.S. multinationals will outperform domestically focused countries. The larger percentage of a company’s business outside the U.S., the better it will perform, Doll said.  Dividends will increase more than earnings, Doll said. Year-over-year dividend growth has been in the double-digit percentage territory since mid-2011, and in 2013 Doll sees that pattern continuing.

Uncertainty and caution in corporate boardrooms regarding reinvestment in the business, high cash balances, strong free cash-flow profiles and low payout ratios contribute to this pattern. “While expectations of higher taxes on dividends have increased the number of one-time dividends, we expect higher taxes on dividends to have little effect on continued increases in payouts,” Doll said. “In many cases, cash and cash flow are so strong that increased hiring and reinvestment by corporations could happen along with increased dividend payouts.”


Some of the positives driving growth are strong corporate sectors, bank lending standards starting to ease, low inflation, and what Doll calls a “healing” housing industry. Although the economy is sputtering along, Doll calls a recession unlikely but also does not see any noteworthy accelerations. Unemployment will lessen but will remain stubbornly high. U.S. manufacturing will continue to grow, powered by cheap natural gas, Doll predicted. Narrowing of wage differentials between the U.S. and emerging markets on the back of the dollar’s decline in recent years and significant wage increases elsewhere have made the U.S. more attractive as a labor source.

“We believe we will witness an increase in manufacturing jobs and GDP as a percentage of total jobs and GDP, admittedly from a low base,” Doll said. An increase in manufacturing jobs in 2013 should have a positive impact on trade, capital expenditures, jobs and inflation.

Doll’s other predictions are:

  • Europe begins exiting recession by the end of the year as the European Central Bank eases and financial stresses lessen;
  • The U.S. yield curve steepens as financial risks recede and deflationary threats lessen;
  • Emerging market equities outperform developed market equities;
  • Large-cap stocks outperform small-cap stocks and cyclical companies outperform defensive companies; and
  • The U.S. government passes a $2 to $3 trillion ten-year budget deal.  

Doll’s predictions for 2013 can be downloaded here, including a full version that includes a scorecard of his predictions for 2012. (He scored 6 out 10, slightly below his average of 7 to 7.5 for the past 25 years that he has been forecasting the economy.) Financial advisers can subscribe to Doll’s weekly commentary and special market reports here

Nuveen Asset Management, an affiliate of Nuveen Investments in Chicago, had more than $117 billion in assets under management as of September 30, 2012.