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BlackRock's Bob Doll Surveys the Investment Landscape for 2011

Bob Doll, the chief equity strategist at BlackRock, isn’t that optimistic about U.S. economic growth and the stock market for 2011.

Don’t misunderstand:  Bob Doll, the chief equity strategist at money management firm BlackRock, isn’t that optimistic about U.S. economic growth and the stock market this year. 

Sure, he’s predicting that real gross domestic product will reach “a new all-time high,” creating two to three million jobs before 2011 is out. Moreover, he thinks domestic equities will produce double-digit returns for the third year in a row, a rarity in financial history. And while his official forecast is just for “low double-digit total returns,” he allows that this may well be “too pessimistic.” 

But as he juggled questions from reporters at a January 4 press conference, Doll realized he may have gone too far.  “We are still in a fractured, difficult, credit-problem world,” he reminded the audience. “We expect the economy to continue to muddle through, but still subpar.” Even with those millions of new jobs, for instance, he doesn’t see unemployment falling below 9 percent.

(It’s crystal ball time on Wall Street again, an annual tradition in which financial industry gurus bring out their briefings on the new year’s investment outlook.)

Judging by his track record for 2010, Doll’s analysis should probably be taken seriously. By his accounting, 7 of his 10 predictions were spot-on, and the others – relating to interest rates, the best-performing stock sectors, and politics – were near-misses. 

On the other hand, remember that he’s an equity guy. Of course he wants to see a strong stock market. 

Within that market, Doll is most bullish on energy, technology, health care, and telecommunications, and most pessimistic about the financial and consumer staple sectors. He figures that energy stocks “have lagged the improvement of the commodity,” and that oil companies are enjoying good earnings and strong cash flow. One easy prediction: “I don’t think peace is going to break out in the Middle East any time soon.” Nor, with oil topping $90 a barrel on the day he spoke, did it take much of a crystal ball to foretell that it will hit $100 sometime this year. 

Still, most of his predictions do go out on limbs of various sizes, and Doll listed some factors that could throw them out of whack: new credit problems in housing, state and local governments, and sovereign debt; major commodities price increases; inflation fears; “a greater than expected rise in interest rates”; protectionist trade wars; and “undue emerging markets tightening to curb asset bubbles.” In other words, the world will do what it wants, and there will undoubtedly be some unforeseeable economic or financial crisis again.

Fran Hawthorne is the author of the award-winning “Pension Dumping: The Reasons, the Wreckage, the Stakes for Wall Street” (Bloomberg Press) and “Inside the FDA: The Business and Politics behind the Drugs We Take and the Food We Eat”  (John Wiley & Sons). She writes regularly about finance, health care, and business ethics.

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