Every January, Bob Doll, senior portfolio manager and chief equity strategist for Nuveen Asset Management, makes 10 predictions about the markets and the economy for the year.

Last year, shadowed by anxiety and uncertainty, Doll says, proved mostly unrewarding for investors. China’s slowdown and the long-anticipated Fed liftoff, as well as a late-year commodity prices meltdown and continued terrorism threats presented headwinds for stocks.

Doll notes that the fundamental issue of weak corporate earnings was most responsible for equities’ lackluster progress. The combination of a strong U.S. dollar and falling oil prices acted as a drag on revenues and earnings. It wasn’t surprising that energy, materials and some industrial companies faced problems. What was somewhat surprising, however, was that the benefits of lower oil prices only marginally lifted earnings from consumer-oriented and other “energy-using” segments of the market. 

This year brings good news (a recession is unlikely, Doll believes), bad news (it’s difficult to see significant market gains), as well as ugly news (in order to make money, tactical moves may be likely).

Retirement plan advisers will have their work cut out for them, according to Doll, and the need for advice will only go up when they can’t simply fall back on index funds. “When the market’s up, say 15% every year, it doesn’t matter,” he tells PLANADVISER. People can buy the index and ride the wave. “But we don’t have that anymore and people will have to work harder”—both as fund managers and as investors.

Plan participants who are nearing retirement obviously have more challenges than younger ones, Doll says. Younger participants, especially those just starting out, simply need to be actively investing their money, and leveraging the power of dollar-cost averaging and a long time horizon. “How many 20-year periods has the stock market not outperformed everything else?” he asks. “Answer: zero! They should be in the stock market! Jumping out at the bottom is what makes bottoms, just like careening in at the top makes tops.”

Market conditions may motivate more plan sponsors to turn to active management strategies, Doll believes, but “managers are going to have to show the results to justify the money coming their way.”

Plan sponsors and advisers will have to pick good managers, Doll says, “managers that have a process that makes good sense and that have some history of outperformance.” But outperformance is just one factor. “You cannot judge on the past three years or just look at past performance.”

Factoring in the manager’s process means weighing several considerations, a combination of manager changes and how the actual process changes. “Is there reason to believe that a process is going to work over time?” Doll points out. “No one can guarantee a one-year return.”

For this year, Doll forecasts Treasury rates will rise, but high yield spreads will fall. He notes that for several years Treasury yields have been rising unevenly, and that many people forget (or perhaps missed altogether) that 10-year Treasury yields bottomed at 1.43% in July 2012.  Since then, rates have meandered irregularly higher as economic growth advanced and the Fed continued to make slow moves toward normalization.

U.S. equities will experience a single-digit percentage change for the second year in a row, Doll predicts, for the first time in almost 40 years. Markets rarely deliver single-digit returns, he observes, even though the average long-term annual rate of return for equities is in the high single digits. And it is especially rare for equities to do so in consecutive years. The last time this happened in the U.S. was 1977 and 1978. He believes a large upside or a large downside move (meaning a double-digit percentage gain or loss) is unlikely.

Doll’s forecast for S&P 500 earnings: they will make limited headway as consumer spending advances are partially offset by oil, the dollar and wage rates. In 2015, the constant pressure on earnings was the most significant headwind for equities. Doll does not expect the dollar to climb as significantly as it did in 2015, and he believes oil prices are bottoming, twin headwinds that should ease.

Upward pressure on wages, however, could emerge as a new problem for earnings. Higher levels of consumer spending should provide modest revenue growth, and ongoing corporate buybacks should allow some degree of earnings growth.

Bob Doll’s predictions for 2016 are:

1. U.S. real gross domestic product (GDP) remains below 3% and nominal GDP below 5% for an unprecedented tenth year in a row.
2. U.S. Treasury rates rise for a second year, but high yield spreads fall.
3. S&P 500 earnings make limited headway as consumer spending advances are partially offset by oil, the dollar and wage rates.
4. For the first time in almost 40 years, U.S. equities experience a single-digit percentage change for the second year in a row.
5. Stocks outperform bonds for the fifth consecutive year.
6. Non-U.S. equities outperform domestic equities, while non-U.S. fixed income outperforms domestic fixed income.
7. Information technology, financials and telecommunication services outperform energy, materials and utilities.
8. Geopolitics, terrorism and cyberattacks continue to haunt investors but have little market impact.
9. The federal budget deficit rises in dollars and as a percentage of GDP for the first time in seven years.
10. Republicans retain the House and the Senate, and capture the White House (as long as Trump is not the nominee).

Every year, Doll also scores his previous year’s forecast. He gives himself seven out of 10 for 2015. He incorrectly predicted a 3% growth in U.S. GDP and said U.S. equity mutual funds would show their first significant inflows since 2004. He marked as “half correct” two calls: that U.S. equities would enjoy another good yet volatile year, as corporate earnings and the U.S. dollar rose, and that oil prices would fall and then end the year higher than where they began.