While Doll expects GDP growth to slow to a range of 2 to 2.5 percent, he believes the U.S. economic expansion will continue to June 30, 2019, making it the “longest ever economic upcycle.”

Doll expects the unemployment rate to reach a new low this year and wage growth to approach 4 percent.

Despite a brief inversion in late 2018, Doll expects a flattening yield curve over the next year. Credit spreads are expected to continue to widen, but that has been to a smaller degree compared to previous cycles.

“As revenue growth slows and cost pressures increase, profit margins will inevitably come under pressure.” Doll estimates 2019 and 2020 S&P 500 EPS growth at 6 percent and 5 percent, respectively, compared to 9 and 10 percent for the consensus.

While we’ll see a positive return in U.S. stocks, the market will not reach a new cycle high this year, as it has every year since 2009. It’ll be a decent year for stocks, with Nuveen predicting a year-end target for the S&P 500 at around 2,650.

U.S. stocks have outperformed non-U.S. stocks for the last several years, and Doll believes a reversal is in the cards. The U.S. dollar is expected to decline as well.

Doll likes tech stocks’ strong earnings growth, balance sheets and valuations. The asset manager was negative on financials last year, but these companies now have better balance sheets and are cheap. “Finally, despite recent strength, we think health care stocks are the defensive sector showing the best earnings growth prospects.”

This is an unprecedented level outside of a recession, Doll argues. “The recent tax cuts have added to the deficit, and neither political party is showing any interest in reigning in federal spending. The probability of significant additional spending on new programs is unlikely given the divided Congress, but a modestly sized infrastructure plan is not out of the question.”

The relationship between the U.S. and China, in particular, is a big unknown heading into this year. Doll characterizes the political environment as “increasingly contentious, troublesome, unpredictable, unpleasant and, perhaps, dangerous.” The U.S./China conflict is one investors and advisors should be watching closely; how it plays out could greatly impact the markets.

The 2020 presidential campaign will come to the forefront this year, and Doll expects the number of Democrats running for the top office to reach double digits. Meanwhile, President Trump will experience a challenge from within his own party. “2019 will be a banner year for cable news junkies, but let’s hope politics don’t cause significant damage to the economy and markets.”