Bob Doll used to be chief equity strategist at BlackRock, the biggest fund manager in the world but now is at Nuveen Asset Management. He has been a legend of the US stock market and his predictions have been closely watched over the years.
Some critics say he hasn’t been performing well lately but I relied on him when too many experts were super negative on stocks in 2009 — he even gave me the guts in 2008 to look for the positives that could turn the market around by March 2009.
In fact, I interviewed him, when I took my Sky News Business program to New York in 2010, in the BlackRock boardroom, which had a table as long as a 25-metre swimming pool!
A good year
This is what he predicts for this year and I will throw in my twopence worth as well.
He predicts a new all-time high for the S&P 500 “some time this year”, which is only 6% away. I think the US market will do better than this, but there will be some moments when I’ll have doubters — I could even doubt it! Or maybe not — but I reckon the Yanks do well and we even do better.
He believes large multinational companies that rely on emerging economies will do well this year. This augurs well for local companies such as BHP and Rio if he’s right, and once again, I support his view on up and coming economies. The IMF also believes ASEAN countries will return to pre-GFC growth rates and this means more modernization and that means more steel, which helps coal and iron ore.
On the sectors, he is pro-cyclical and if we see a big year in stocks, which is due, then these sorts of companies are likely to do well. Doll likes Tech companies, industrials and those with positive cash flow to buy stocks and raise dividends.
He thinks banks and financials will do OK, but “won’t lead the race” and I think that’s a good call for Australia. I’d buy financials on any silly dip or maybe a takeover target.
He expects US and global growth to be better in 2013 and I support this view but importantly, he told CNBC that “the perceptions of growth” will improve so businesses and investors will be more confident about the future of their operation and where P/Es are going, that is up!
This is a big issue for 2013 and we will see this here in Australia as well despite the Treasurer, Wayne Swan, backing away from his surplus promise, which will be good for growth, even with an election year ahead.
Less fear this year
He is arguing there will be a “little less fear in 2013” and we will see things such as more merger and acquisitions (M&A) activity, which not only reflects more confidence but helps share prices.
He is cautious about being too cautious on defensive stocks but that could provide value for the long-term player, who wants dividends more than capital gain, while they’d cop the gain too if it came along.
He thinks dividend increases will be at a double-digit rate, which looks huge for the likes of Telstra here, so I’d rule this one out as a general prediction, but many cyclical companies that have not even paid dividends lately could easily return dividends this year. I expect better dividends from many companies if the stock prices are rising and economic growth picks up over the year.
On interest rates
Doll also expects long-term interest rates to rise in the USA. In Australia, I think we will see rates fall for home loans, however longer term rates could sneak up, but only slowly, as we get to year’s end. For this to happen, we’d need to see a big spike in stocks, which is definitely possible.
Bob Doll might have had some years where he hasn’t performed as well as other fund managers and equity strategists but his history is there to look at and as a legend of the stocks game I’m prepared to take his tips, especially when they mirror my own views!
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