As the year draws to a close, it appears more of our predictions are correct than not...
We have been describing 2017 as a “Year of Transition." We expected improving economic growth, accelerating corporate earnings and rising interest rates. We also predicted rising volatility amid equity market leadership changes. Depending on movements of a few basis points for the 10-year Treasury yield, we are likely to get either 7 or 7½ of our 10 predictions correct.
Read an excerpt of Nuveen's 2017's predictions in review, or download the entire investment commentary as a PDF.
Nuveen's 2017 Predictions:
CORRECT: Unemployment drops to its lowest level in 17 years as wages increase at the fastest pace since the Great Recession. Unemployment is down to 4.1%, the lowest level in 17 years. Wage rates have remain depressed since the Great Recession, but have slowly started climbing over the past 12 months with annual wage growth up 2.5%.
CORRECT: The financials, health care and information technology sectors outperform energy, utilities and materials. We are comfortably ahead in this prediction, as a basket of our favored sectors is up 28.7% compared to a basket of our least favored (up 10.9%).
CORRECT: Active managers’ performance improves as flows into equities rise. Equity outflows slowed during 2017 as active managers are beginning to improve. Last year, only 19% of large cap managers outperformed their benchmarks, while just under half have so far this year.
WRONG: Stocks hit their 2017 highs in the first half of the year as earnings rise but price/ earnings multiples fall. Earnings rose during the year, but stock prices rose intermittently throughout the year and continued to post record highs well into the second half of 2017. Price/earnings multiples rose during the year as well.
Equity Outlook [For 2018]
We expect global growth to continue to accelerate in 2018. Two factors that will likely change, however, are the inflation and monetary policy backdrops. Inflation is likely to rise slowly next year and the Fed and other central banks are in tightening mode. For equities, this backdrop means we expect the current bull market should continue into 2018. The rate of gains in 2017 was surprisingly high, and we don’t expect to see that matched next year, but we think equities still have room to run. Higher volatility may mean we see more dispersion between winners and losers in 2018, but we still think it makes sense to hold overweight positions in stocks.
To review the accuracy of Nuveen Asset Management's 2017 predictions, download Nuveen Asset Management's latest commentary.
To learn more about Nuveen Asset Management and other Money Managers, give us a call at 1-800-541-7774 or contact us here to speak with a knowledgeable Wealth Manager.
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