Bob Doll’s Market Predictions For 2017

The chief equity strategist for Nuveen Asset Management shared his thoughts about 2017 at this week's Inside ETFs conference in Florida.

Senior ETF Analyst
Reviewed by: Sumit Roy
Edited by: Sumit Roy

"A year of transition as markets return to fundamentals." That's how Bob Doll, senior portfolio manager and chief equity strategist for Nuveen Asset Management, characterized his 2017 outlook Tuesday morning talk at Inside ETFs in Hollywood, Florida.

Doll laid out his predictions for the year, starting with a relatively safe call for U.S. and global economic growth to improve modestly in 2017 as the dollar reaches parity with the euro.

The basis for this prediction isn't so much big fiscal stimulus from a Donald Trump administration―it will be at least six months before any fiscal policy legislation is enacted, according to Doll―but rather, a pickup in consumer confidence.

Tax Reform Won’t Come Easily

Doll explained that due to the disparate views held by Republicans, it will take a while before a tax cut compromise is reached. That's why he believes the initial optimism about the Trump agenda will fade in light of slow legislative progress. On net, taxes will go down, he says, but it will take longer to happen, and the impact won't be as big as people hope.

As the economy accelerates, Doll also expects that the unemployment rate will drop to its lowest level in 17 years, while wages will increase at the fastest pace since the Great Recession. He anticipates nonfarm payrolls will grow at a monthly average of 150,000, down from 180,000 last year, but still a strong rate.

Doll pointed out that whenever the unemployment rate is below 5% (it was 4.7% in December), wage growth tends to go up.

Stocks To Outperform Bonds

Moving on to financial assets, the Nuveen strategist predicted that Treasury yields will move higher for a third-consecutive year for the first time in 36 years as the Fed raises rates two or three times.

Doll emphatically believes the 35-year bull market in bonds ended last year and that the low print of 1.37% reached on the 10-year Treasury will never be seen again. Instead, the yield will probably increase by 50 basis points to hit 3% by the end of 2017.

Meanwhile, stocks will outperform bonds during the year, in Doll's view. This will be the sixth year in a row that's happened, the longest streak in 20 years.

The S&P 500 is expected to end the year at 2,350―a gain of 5% (or 7%, including dividends). The high for the index is likely to occur sometime in the first half of the year, says Doll, who also predicted earnings will rise, while earnings multiples will fall due to rising interest rates and inflation.

But the S&P 500 isn't where Doll sees the most upside. He believes small-caps, cyclical sectors and value styles will beat large-caps, defensive and growth areas in 2017.

Health Care & Tech To Outperform

Meanwhile, on a sector level, Doll says that financials, health care and technology will outperform energy, utilities and materials.

Financials are a beneficiary of asset reflation, higher interest rates, easing regulations and cheap valuations. Their biggest risk is a global financial accident.

He likes health care because of strong revenue and earnings growth, innovation and expenditure growth, and discount valuations. The biggest obstacle he sees for this sector is political and headline risk.

As for technology, good growth and value characteristics, strong balance sheets and free cash flows, and an improved capital spending outlook bode well for the sector. The biggest risk for tech is a rising dollar, which further hampers earnings growth.

Stock Picker's Market

One idea Doll continually brought up during his talk was that active managers would likely outperform this year. "This is a stock picker's world for the first time in a while," he said.

Doll mentioned that active tends to beat passive when small-caps outperform large-caps, when international equities outperform U.S. equities, when value stocks outperform growth stocks, when equal weighting outperforms market-cap weighting, when correlations are low, when interest rates rise and when credit spreads fall.

Aside from international equities outperforming U.S. equities, Doll saw all the ingredients in place for active to beat passive. "If active managers can't outperform now, they need to quit or get fired," he pronounced.

Rising Nationalist Trends

On the political front, Doll mentioned that nationalist and protectionist trends will rise as pro-domestic policies are pursued globally. Whether those trends are bullish or bearish for risk assets is uncertain.

In the U.S., "we've mostly seen the pro-growth Donald Trump," said Doll. "But if the protectionist Trump shows up, you need to sell risk assets."

Doll said that a potential trade war between the U.S. and China would have negative short-term consequences for both countries, but those consequences would be more readily overcome by the U.S. than China.

Maturing Bull Market

Doll ended his talk with one of his favorite quotes by Sir John Templeton: "Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria."

Doll believes that 2017 is a year of transition between the skepticism phase and the optimism phase. That means overall returns are likely to be mediocre, though there's plenty of opportunity for active managers to outperform with good stock selection, in his view.

Contact Sumit Roy at [email protected].


Sumit Roy is the senior ETF analyst for, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for, with a particular focus on stock and bond exchange-traded funds.

He is the host of’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays,’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.