U.S. stocks will extend gains from a five-year high as corporate earnings increase and central banks maintain policies to stimulate economic growth, said Robert Doll, Nuveen Asset Management LLC’s chief equity strategist.
Interest rates near zero will lead investors to keep adding to equity funds, said Doll, who works at the Chicago-based firm that oversees $117 billion. He said he’s bullish on shares from the U.S. and emerging markets and concerned about European and Japanese equities.
“The fundamentals, meaning corporate earnings, macroeconomics, delay of problems in Washington, zero-percent return on cash, and monetary accommodation virtually everywhere in the world,” Doll said in a television interview on “Bloomberg Surveillance” with Tom Keene. “They’re the ingredients to me for stocks to go higher.”
The Standard & Poor’s Index has rallied 6.2 percent in 2013 after U.S. lawmakers reached a compromise on more than $600 billion in spending cuts and tax increases and corporate profits reached a record. The U.S. equity benchmark is less than 4 percent away from an all-time high reached in October 2007.
The Federal Reserve’s efforts to spur growth have included purchases of over $2 trillion in securities from December 2008 through several rounds of quantitative easing. The European Central Bank flooded its banking system with over 1 trillion euros ($1.37 trillion) in short-term cash beginning over a year ago, while the Bank of England and Bank of Japan have each undertaken their own stimulus programs.
Individuals last month allocated 61.4 percent of their investments to stocks, the largest proportion since July 2011, according to a survey by the American Association of Individual Investors. That compared with 20 percent in bonds and 18.4 percent in cash, the data showed.
“The healing of the world doesn’t mean we’ve solved all of our problems,” said Doll. “But a slow healing means interest rates will creep higher.”
Losses in bond funds will spur individual investors to put more money into equities, Doll predicted. Treasuries have handed investors a 0.9 percent loss this year as of yesterday, according to Bank of America Merrill Lynch indexes. Growth around the world is forecast to be 2 percent this quarter and 2.4 percent in the following three months, based on the median estimate from economists surveyed by Bloomberg.
“There are always risks,” Doll said. “Markets love to climb the walls of worry, and my guess is that the positive list is going to overwhelm the negative list.”