Market will 'not like it’ if stimulus talks stop & no consensus is met: Bob Doll

Chief Equity Strategist and Senior Portfolio Manager at Nuveen Bob Doll joins Yahoo Finance’s Kristin Myers to discuss his outlook on the markets as Democrats and the White House aim to reach a coronavirus stimulus deal.

Video Transcript

KRISTIN MYERS: There's lots to chat about here today in the markets. The Dow is up now for the fourth straight day. So for more on this, we're joined now by Bob Doll, Chief Equity Strategist and Senior Portfolio Manager at Nuveen. Bob, thank you so much for joining us.

BOB DOLL: My privilege.

KRISTIN MYERS: So I want to start there on the news about private payrolls. We have been-- long been concerned that that positive trend that we've been making on the jobs front was soon going to be followed by some sort of downturn, especially as we're seeing the pandemic continue, as we see these coronavirus cases continue to spike. Is that what you're seeing now? Is this that downturn that we're starting to see, that shift more into the negative news territory when it comes to jobs?

BOB DOLL: I think it's more mixed. I don't think we're turning down. For example, the manufacturing numbers we got earlier this week were very strong. And the job numbers, they're not going to be negative. They're just not going to be as positive.

So we had-- had the-- May and June felt like a V-recovery. Now it's just getting a little bumpier. We'll continue to recover, but it's not going to be a straight line. And at the moment, the employment numbers that are just putting up a little bit of a question mark into people's minds.

KRISTIN MYERS: So on that point of a question mark, what do you see coming at the end of the week when we get that jobs report, if you're seeing a kind of mixed picture here when it comes to employment?

BOB DOLL: Well, given all the data points we have that can go into that with very low correlation, it's likely we're going to get a number that's not as good as the last two months. Part of the seed is that those numbers, if you recall, were pretty much off the chart. So in normal times, I think we're going to get a number that still looks good. It's just not going to look good by comparison to the last two months.

And that's what I mean by a little more of a question mark, a little wavier. But it's still up and to the right, but not a V.

KRISTIN MYERS: So when it comes to the stimulus-- I had mentioned that as well-- there's some kind of huge questions that are remaining on the final amount, particularly that $600 boost. But if you see a reduction in that figure from $600, and if we see not as positive news on the unemployment numbers-- I mean, what do you think is going to be coming for us? How do you think the markets are going to react to that?

BOB DOLL: So, look, the market-- the market has done oh-so-well. And it's like momentum all by itself. Don't fight the tape. There is no alternative, fear of missing out-- it is all things that are pushing the market up.

Should the fundamentals turn a little foggy, the market perhaps turns a little foggy-- my view has been we're not very far from where we were at high on June 8. We're just a little higher than that. But we really are in a summer churn. You got the big 35% decline, the retracement of almost 90% of it. And since June 8, the market's kind of going sideways.

I think we'll get more of that for the very reason you just said-- the news is good, but it's no longer just a one-way great.

KRISTIN MYERS: So let's talk more, I guess-- I don't know if I want to call it doomsday scenario. But let's just take worst-case scenario here when it comes to the stimulus. Everyone agrees that there will be some sort of package. But how long is it going to take us to get there?

So what if we blow past this deadline of this week and these negotiations, this stimulus fight drags on for another week or two. What then?

BOB DOLL: So, look, the market is expecting a deal. There's no question about it. If it slips another week, I think the market will be OK. Bad news would be talks stop and they can't agree on anything and we're not going to get anything. The market will not like it a whole lot.

But given that both the Democrats and the Republicans want to get a deal, they're just going to have to hammer out the details. And if it's you and me, you're going to have to give on one of your two favorite points, and I'm going to have to give on one of my two favorite point. And we shake hands, make a deal, and go forward.

KRISTIN MYERS: There was an interesting statistic that came out. Researchers have been studying this and they said that a one-month expiration-- this is what they're estimating-- could cause consumer spending to fall by 4.3%. I mean, what are your thoughts when you hear something like that?

BOB DOLL: That's not very pleasant news, there's no question about it. And that's why they've got to get this bill done so the consumers can spend some money. Lord knows they've got the balances to spend that money. They just need the incentive to do it. And this bill, I think, would provide that.

So I'm counting on a bill. I don't really count, the market does. And the market is expecting a bill as well. And look, if they're struggling to get somewhere and they expect something it's more likely to be a bigger bill than a smaller bill.

And what do you need for me to get your vote? Fine, you've got it. That's where this thing will end up. We'll have a pretty big-- pretty big bill. And it will take between fiscal and monetary. We will cross the 50% of the GDP in terms of aid and stimulus-- gargantuan numbers.

KRISTIN MYERS: All right, looking at upside, we've got Johnson & Johnson, that stock is up now about 1%. They have reached a fairly large deal, $1 billion for 100 million vaccine doses. You mentioned in your note that pharmaceutical companies now are moving at an unprecedented speed.

I mean, just how much is the market hanging on to positive news around a vaccine or some sort of treatment for the coronavirus?

BOB DOLL: It's certainly hanging on. If you'll recall, not that many weeks ago, the rumors of a vaccine, the market would go straight up. The rumors go the other direction, the market would go down.

I think in the market at its current level is we're going to get treatment and eventually a vaccine before a whole lot of time goes by. That is my assumption as well. There are so many companies, so many academic institutions working on this in partnership. I think we're going to get something that will please the market before too many months go by.

KRISTIN MYERS: All right, well, on that note, let's chat recovery. You say that it's going to be bumpy, but should persist. I mean, how bumpy and how patient is the market going to be going through that recovery?

BOB DOLL: Well, look, let's remember, we just recently had the second quarter GDP report. It was the worst ever. It will be followed by the third quarter, which will be the best ever. Third quarter GDP it is likely to be up at least 15%, maybe over 20%. That's wild numbers.

And we'll probably get a fourth quarter that's up on the order of 5% and above normal next year. So the numbers are strong. As you probably know, in the second quarter earnings season, which we're just slowly beginning to wrap up, while the numbers aren't good, they're a lot less bad than people thought. And so that is giving some underpinning to this market as well.

KRISTIN MYERS: All right, we'll have to leave that there. Bob Doll, Chief Equity Strategist at Nuveen, thanks so much for joining us.