Bob Doll Checks in on His 10 Predictions for 2024

Stocks are experiencing a "high-risk, momentum-driven bull market," which calls for investors to take care about where they put their money, Bob Doll, Crossmark Global Investments CEO and chief investment officer, said Tuesday. "The path of least resistance for the stock market remains the upside. Momentum: It's about buying begetting buying. It's about FOMO, fear of missing out," Doll said during his quarterly webcast, in which he reported on how his 10 predictions for 2024 are faring. Crossmark continues to expect the economy to enter a recession or least a significant slowdown before year-end, Doll said. As for why the market is high risk, Doll pointed to high valuations, noting the S&P 500 is selling at 27 times trailing earnings and 23 times consensus earnings estimates. " There are only precious few days since stock market history when the market has sold at a higher P/E ratio," he said. Sentiment has become more bullish, which tends to be a concerning sign, Doll said, suggesting the economy and earnings may not be as robust as people think. "Predicting the end of a momentum-driven bull market is a fool's errand," he said. "There are no statistics, there's no history that tells you now's the time to bow out. So what do you do as an investor? All I can tell you is what I'm trying to do as an investor for my large cap U.S. equity portfolios. "I'm fully invested, but I'm becoming more and more careful about what I own. Valuation, cash flow, earnings predictability, earnings persistence. These things are more and more important as the risk level goes up," Doll said. Investors have to be involved, he added. "Sitting on the sidelines is not a good idea as it is akin to standing in front of a freight train that's coming at you." In Crossmark portfolios, Doll said he was buying "more laggards, more cheaper, more defensive stocks," such as Walmart, Coca-Cola and Verizon, and trimming some higher-value tech stocks to make room for those more cyclical names. On June 30, Crossmark's large-cap core portfolio traded at 21 times forward consensus earnings. The price to cash flow ratio was 13 times versus 22 for the benchmark, and return on equity was 24% for their stocks compared with 22% for the market, he said. Doll touched on five areas that Crossmark is focused on for the third quarter and its portfolio responses:

• The economy and earnings: The firm expects further economic deceleration and sees earnings estimates as too high. The portfolio response: Stay flexible, don't chase returns, invest if there's a big downdraft and consider alternatives.
• Fixed income: With the Fed possibly making two cuts and the inflation path key, Crossmark recommends neutral duration, a focus on quality and says munis are attractive if tax-appropriate.
• Equities: Focus on earnings, buy on dips and trim on rallies.
• Sectors: Overweight energy and financials, which can continue to improve; underweight utilities, health care and real estate; own value with a catalyst and inexpensive growth.
• International: Markets are cheaper than the U.S. and their economies are showing signs of life. Portfolio response: Slowly increase international weighting.

So how are Doll's 10 predictions for this year going? Three are on track and it's too soon or too close to call on the seven others, he noted.