Doll says that we are in a period called “more muddle through.” Basically, he doesn’t think the markets are going to go either up or down in a sustained manner. That doesn’t mean we should expect calm and quiet stock markets. The 0% return for the first quarter of 2016 included a record-setting double digit drop followed by a double digit recovery.
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Doll reviewed the first 45 days of the year to attempt to explain why in January we had the steepest drop on record in the US market. The reasons he cited were: fear over a recession, fear that oil prices would continue to fall, fear China’s slowdown was heading them into a black hole, fear the Federal Reserve would have five interest rate hikes, and fear over the US elections.
Then he gave the reasons for the market’s sharp rally: investors decided there wouldn’t be a recession after all, that oil prices probably wouldn’t fall to $0 and eventually rise, that even with its slowdown China was still the world’s second-fastest growing economy, that the Fed would probably only raise rates once or twice, and that whoever is the next president will be a disaster anyway.
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