(Bloomberg) -- U.S. stocks are set for a correction of 5 percent or more this year after the longest stretch in history without one, said Bob Doll, chief equity strategist at $172-billion Nuveen Asset Management.
The length of time without a significant retreat in the market -- the last decline of 3 percent in the S&P 500 was in November 2016 -- means investors will get nervous when stocks start to fall, but strong fundamentals will prevent a full-blown bear market, Doll said Tuesday in an interview at Bloomberg’s Toronto office.
"People will say, ‘Oh my goodness, should I jump out the window, is the world ending?’" he said. "But the underpinning’s good."
Doll expects real GDP to reach 3 percent this year and nominal GDP to hit 5 percent, the highest in over a decade. He also sees unemployment falling to the lowest level in nearly 50 years as wage growth hits the highest since the Great Recession.
Still, 2018 won’t be able to repeat the "nearly perfect" conditions of 2017, he said. U.S. equity returns will lag earnings growth for the first time in six years, and investors may begin anticipating an economic deceleration in 2019.
Doll is "significantly underweight" fixed income and is investing in technology, health care and financials. He described himself as "pretty ho-hum" on energy even as oil prices rise above $64 a barrel.
"I think this price will invite more shale production and might invoke some OPEC cheating," he said.
Doll manages the Nuveen Large Cap Core Fund and is also sub-adviser for the Evolve Active US Core Equity ETF, traded on the Toronto Stock Exchange.
The fund is more than 300 basis points ahead of its benchmark, the Russell 1000 Index, year-to-date. Its top five holdings are Microsoft Corp., Apple Inc., Cisco Systems Inc., Visa Inc. and UnitedHealth Group Inc.
Nuveen is part of the Teachers Insurance & Annuity Association of America (TIAA), which has $948 billion of assets under management.
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