With stocks sitting at record highs, one Wall Street veteran is not buying into the market euphoria.
“Investors appear too complacent about market risks, and we are currently cautious towards stocks. But that could change,” Nuveen Chief Equity Strategist and Senior Portfolio Manager Bob Doll wrote in a note to clients.
Some of his reasons Doll’s cautious toward stocks right now: deteriorating earnings growth forecasts, overly optimistic rate cut expectations and exceedingly high valuations.
However, Doll says there are 5 scenarios that could make him more bullish in the current environment.
“If we did get a deal with China in the next couple of weeks… if the market backed off this ‘the Fed's going to [cut rates] three times’ idea,” Doll said in an interview on Yahoo Finance’s The Final Round. “Needless to say, we're watching earnings and, more importantly, forward guidance…. And, I hate to say it this way, but lower prices certainly would make us more bullish.”
Outlook for the rest of 2019
When it comes to the second half of the year, Doll says his original prediction for 2019 still stands: choppy and frustrating. But he adds that we would likely avoid a recession or an end to the bull market.
“A lot of the gains this year are already in the bank,” Doll told Yahoo Finance. “I think it gets more choppy, more frustrating this year … I'm not negative, I just have a hard time seeing a big move up from here.”
What if the Fed doesn’t cut rates?
With the market pricing in a 100% chance of a rate cut at the upcoming Federal Open Market Committee meeting on July 30-31, Doll says it won’t be a pretty scene for the investors if the Fed doesn’t go through with the easing cycle.
“The Fed has gone out of its way very explicitly with lots of different people, lots of different speeches basically saying we're going to take back what we did in December,” Doll said. “So my guess is we'll get a cut. If we don't, wow, we're really all missing something.”
Iryna Kirby is a Producer for Yahoo Finance. Follow her on Twitter at @IrynaNesko.