Nuveen's Bob Doll sees a 10 percent stock correction amid a pretty good but volatile year for stocks, and he expects gold and other commodities to continue to fall.
Doll, chief equity strategist at Nuveen Asset Management, also sees the economy growing at a 3 percent pace and the 10-year Treasury yield topping out at about 3.5 percent in 2014, while the Federal Reserve continues to hold short-term rates near zero. It should become clear by the end of the year that inflation has bottomed, but it will not be a factor to help gold out of its slump in 2014.
"In our opinion, the mystery is not that gold finally came down—the mystery is that it took so long. The preoccupation with gold was originally related to a concern about the viability of the financial system, and the concern about inflation with so much money being 'thrown' at this system," he said in his forecast, issued Jan. 7. Gold lost about 28 percent last year, its worst decline in more than three decades.
"Now the added headwinds of improving global growth and a reduction in systemic threats, some rise in real interest rates, and likely dollar improvement, all put further pressure on gold's allure. In addition, the lack of strong global economic growth and abundant supply for many commodities likely argues for trendless, but volatile (as usual) commodity prices," he noted.
As for stocks, he expects the stock market to continue to perform well, and cyclicals should outperform defensive stocks, while gains should be "less ebullient" and the market more volatile. Market gains will depend more on earnings growth, rather than on multiple expansion.
(Read More: Wien sees 10 percent correction)
"While expectations of high single-digit or low double-digit percentage gains are not unreasonable, we also think a noticeable pullback some time during the year is likely to be caused by overbought and deteriorating technical conditions. We would use pullbacks as buying opportunities as most fundamentals continue to improve," Doll said in his forecast.
After the more than 29 percent increase in 2013, Doll expects active managers to outperform the index funds in 2014.
Doll expects the dollar to appreciate, while U.S. energy and manufacturing trends continue to improve.
He sees companies continuing to drive gains with double-digit increases in dividends, stock buybacks and merger activity. Capital expenditures should also increase at a double-digit pace, due in part to delayed investment.
"Dividends and buy-backs have been increasing in recent years, but we expect the largesse to spread to businesses reinvestment (capex) and buying the company 'down the street.' Pent-up demand and aging of plant, equipment and technology argue for increases in those key areas," he said in the forecast.
Municipal bonds should also outperform other fixed income, after massive outflows in 2014. Even though their performance should be mixed, pricing has become more attractive.
"The visibility of Detroit's and Puerto Rico's difficulties has created an interesting opportunity for municipal bond investors. We believe the fall of 2013 was a turning point for state and local governments as politicians and unions have begun to agree to some reduced pension benefits," he noted.
Washington will fall more into the background for markets in 2014, and will be more "benign, and more likely constructive" after the turbulence of 2013.
"The recently negotiated 'small ball' deal between Democrat Patty Murray and Republican Paul Ryan will likely reduce the negative focus on fiscal policy. The November mid-term elections will soon dominate Washington with the likelihood of Republicans slightly increasing their lead in the House of Representatives, and increasing representation, but failing to control the Senate," he noted.
Here is Doll's report card from last year:
1. The U.S. economy continues to muddle through with nominal growth below 5 percent for the seventh year in a row.
2. Europe begins to exit recession by the end of year as the ECB eases and financial stresses lessen.
3. The U.S. yield curve steepens as financial risks recede and deflationary threats lessen.
4. U.S. stocks record a new all-time high as stocks advance for the fifth year in a row.
5. Emerging market equities outperform developed market equities.
6. After two years of underperformance, U.S. multinationals outperform domestically focused companies.
7. Large-cap stocks outperform small-cap stocks and cyclical companies outperform defensive companies.
8. Dividends increase at a double-digit rate as payout ratios rise.
9. A nascent U.S. manufacturing renaissance continues, powered by cheap natural gas.
10. The U.S. government passes a $2 trillion-$3 trillion 10-year budget deal.
Total Score: 7.5 out of 10
—By CNBC's Patti Domm. Follow her on Twitter @pattidomm.