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Predictions With Bob Doll

Faith & Finance with Rob West | Jan 16, 2023

Show Notes

Most investors have heard the disclaimer: Past performance is no indication of future results. We sure hope that’s true for 2023. We’re a couple of weeks into the New Year and there’s one thing most of us can agree on, we’d sure like it to be better than last year. But will it? We’ll talk about that today with Bob Doll.

Bob Doll is Chief Investment Officer with CrossMark Global.

  • 2022 IN REVIEW
  • Looking back on 2022, Bob says what we saw was really a tug-of-war between earnings tailwinds and valuation headwinds.
  • Global financial assets experienced near-record volatility in a generally hostile environment for investors given that the Fed and other central banks left themselves exposed to a rise in inflation as we cautioned in our year-ahead outlook for 2022.
  • 2022 was the first year in nearly fifty that stocks and bonds both had negative returns for the first three quarters. At the beginning of the year, we expected a down year, but not a 25+% bear market.
  • Equity market performance was mostly driven by valuation compression as bond yields adjusted sharply higher in response to elevated inflation and monetary policy normalization by the Fed and other central banks.
  • The P/E ratio of the stock market peaked at 22x at the January 3 high and fell to a low of 15x at the October 12 low. The Bull/Bear Ratio (BBR) fell to a bear market low of 0.57 in mid-October. Historically, BBR readings of 1.00 or less have offered great opportunities for long-term investors.
  • Sentiment continued to lean risk-off on hawkish takeaways from central bank speeches and increasing growth fears. The path of least resistance was lower for most of 2022 with bounces repeatedly reversed by Fed pushback against occasional easing of financial conditions and expectations (or hopes) of a Fed pivot.
  • There was a massive outperformance of value over growth and defensive over cyclical stocks. Energy stocks behaved as if there was no bear market at all.
  • International stocks eked out outperformance over the U.S. despite China’s zero-Covid policy and the ugly Russia-Ukraine war. The strong showing of Democrats in the midterm elections surprised most pundits.
  • So now the key economic question for 2023 is whether central banks will be able to bring down inflation to acceptable levels without a recession. And beyond the inflation dynamic, we remain concerned about potential political and economic shocks that could impact the U.S. and global economy via higher uncertainty and/or tighter financial conditions.
  • So it’s with this backdrop that Bob offers his annual 10 predictions for 2023, which he describes as “good educated guesses.”
  • His theme for 2023 is “the Fed calls the shots.” Bob lists and explains his 10 predictions:

    • 1. U.S. experiences a shallow recession as real GDP is in the bottom ten of the last 50 years.
    • 2. Inflation will fall substantially but remain above Fed’s target.
    • 3. Fed funds reach 5% and remain there for the balance of the year.
    • 4. Earnings will fall short of expectations in 2023. Why is that?
    • 5. No major asset class goes up or down by a double-digit percentage for only the fourth time this century. What will that look like?
    • 6. Prediction #6 looks at “winners and losers.” Bob sees Energy, Consumer Staples, and Financials outperforming Utilities, Technology, and Communication Services as Value beats Growth.
    • 7. The average active equity manager beats the index in 2023.
    • 8. International stocks will outperform the U.S. for the second year in a row.
    • 9. India will surpass China as the world’s largest population and is the fastest-growing large economy.
    • 10. A double-digit number of candidates will announce for President in 2023.

On this program, Rob also answers listener questions:

  • Are there good options for lowering the rate and payment on a private student loan?
  • What is the best way to pay down debts that are mostly medical in nature?


Remember, you can call in to ask your questions most days at (800) 525-7000. Also, visit our website at FaithFi.com where you can connect with a FaithFi Coach, join the FaithFi Community, and even download the free FaithFi app.

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