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Tags: Doll | equity | fatigue | Treasury

Bob Doll: Equity 'Fatigue' Is Weighing on Markets

By    |   Wednesday, 21 August 2013 08:22 AM EDT

The U.S. financial markets are beset by stock market "fatigue" that is complicated by headwinds from the Treasury bond sell-off, according to Bob Doll, chief equity strategist at Nuveen Asset Management.

In his weekly investment commentary, Doll wrote that equities are in "pause mode" while waiting for some combination of better economic news, including stronger gross domestic product (GDP) and earnings growth, actual Federal Reserve tapering and lower oil prices.

"In the meantime, the equity rally is fraying somewhat with the S&P 500 simply marking time for several weeks as evidence of fatigue has set in for buyers."

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Higher oil prices, rising U.S. Treasury yields and the strength in the dollar recently have been a drag on corporate profits, according to the usually bullish Doll.

"We think equities are moderately high-risk investments from a short-term perspective because conditions appear overbought and prices have already discounted somewhat better corporate earnings."

However, Doll is still bullish for the intermediate term. He predicted acceleration in business spending in the coming year due to loosening credit standards, strong corporate balance sheets, high return on investment and lower uncertainty over fiscal cliff policy.

"The good news is that there is opportunity for nominal and real GDP growth with low inflation. Much depends on the level of bond yields, the robustness of earnings and investor sentiment."

John Manley, chief equity strategist at Wells Fargo Funds Management, said he is cutting his recommendation on financial stocks and raising his view on technology shares.

Financial sector "valuations have edged slightly higher, and the fundamental outlook has become more uncertain, in my opinion," Manley wrote on his blog. Accordingly, he said the firm has lowered its recommended exposure to financial stocks from market weight to underweight.

Manley is concerned about the impact of Fed tapering, but he is even more concerned about the prospect of more government oversight of financial services companies.

"There may well be political gridlock in Washington for the next three years, but I suspect that there will not be regulatory gridlock," he predicted.

In the information technology (IT) sector, Manley said he raised the firm's exposure to a double overweight from overweight.

"The IT sector has lagged the market in the past year. Large-capitalization IT stocks are at low valuations and offer high-quality, sound cash flow and attractive dividend yields, in my opinion."

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InvestingAnalysis
The U.S. financial markets are beset by stock market "fatigue" that is complicated by headwinds from the Treasury bond sell-off, according to Bob Doll, chief equity strategist at Nuveen Asset Management.
Doll,equity,fatigue,Treasury
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2013-22-21
Wednesday, 21 August 2013 08:22 AM
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