"In the near-term, probably not a lot since we've had a bit of a run off the panic low a week ago," Doll says. "But if there's no recession, and that's our mainline scenario, stock prices will resume their slow creep higher. If that's incorrect, I am afraid stocks will sell off again."
With that sort of unappealing upside-downside ratio, it is probably no surprise that the man overseeing more than $1.6 trillion dollars worth of other people's money is the latest high profile Breakout guest to stick a fork in buy-and-hold investing. "I think 'buy & hold and let it alone' has unfortunately not worked but re-balancing and dollar cost averaging has worked."
In short, you have to pay attention and take action. "When all of a sudden bonds go straight up and stocks go straight down, it begs for a re-balancing; to buy some stocks and sell some bonds. If you did that, you're already enjoying some benefits," Doll says.
But even with that bounce, 6 of 10 sectors are still down 10% or more in the past month, begging the question: Is it best to bottom-fish here or go defensive?
"I think that on sell-offs you add to cyclicality," Doll suggests. "I'm hedging a bit because cyclicals have had a big move up already off the panic lows but when they revisit, if they revisit those lows, and we still have conviction that we are not going to have a recession, I think you nibble on them."
Tech and Energy would be two favored examples. And if his no recession forecast proves wrong, Doll is also comfortable owning some Healthcare stocks too.
As much as 2nd quarter earnings season has been largely invisible - and eclipsed - due to world events, Doll says weak guidance and a lack of visibility fueled by a lot of "I don't know" comments has seeded an already uncertain environment.
Even so, his latest "Weekly Commentary" succinctly states, "Our summary view is that we believe investors are overly pessimistic about the possibility of a renewed recession in the United States... It is important to remember that equity markets have a poor track record as acting as predictors of recessions and corporate fundamentals remain strong."
In fact, Doll says of 30 stock market corrections of 15% or more since the 1930's, only two have accurately predicted recession.
Finally, Doll says stocks are inexpensive yet unlikely to post a rapid rebound and will continue to be driven by short-term economic issues.
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