BOB DOLL: 10 PREDICTIONS FOR 2012
2 January 2012 by Cullen Roche
12 Comments
Whether you love or hate one of the world’s biggest permabulls is unimportant. The fact is, BlackRock is the world’s largest money management firm and their Chief Equity Strategist plays an important role in how that money gets put to work in the markets. He is cautiously optimistic on 2012 (via BlackRock):
Making predictions for a new year is always a difficult task, but this year the uncertainty associated with emerging markets growth, upcoming elections, and the European debt situation in particular, make the forecasting exercise especially precarious. Nevertheless, it is with this backdrop that we move forward with our predictions for 2012:
- The European debt crisis begins to ease, even as Europe experiences a recession
- The US economy continues to muddle through yet again
- Despite slowing growth, China and India contribute more than half of the world’s economic growth
- US earnings grow modestly, but fail to exceed estimates for the first time since the Great Recession
- Treasury rates rise and quality spreads fall
- US equities experience a double-digit percentage return as multiples rise modestly for the first time since the Great Recession
- US stocks outperform non-US stocks for the third year in a row
- Dividends and buybacks hit a record high
- Healthcare and energy outperform utilities and financials
- Republicans capture the Senate, retain the House, and defeat President Obama
Source: BlackRock
4,5, and 6 appear inconsistent. If earnings miss and Treasuries rise, why should equities surge?
That’s how you make those predictions so you can later claim to be right on a few points.
Andrew,
He appears to expect PE expansion – this is perhaps the only way in which he can expect a positive return in the markets given his forecast for earning’s misses.
That seems like a real stretch to me but he is paid to be bullish.
He said Treasury RATES rise….so he’s predicting Treasury prices fall. That would be consistent with his belief equity prices will go up.
Bob Doll has roughly the same predictions every single year! I googled his previous predictions before and presented them to my colleagues who were hanging on his every word post a presentation he made in my office – nobody cared. Ultimately, if you are the Chief Equity Strategist of Blackrock you are perceived to be beyond reproach.
Not exactly shocking that the world’s largest long only fund manager is bullish though!
http://www.kelpie-capital.com/2011/12/22/2012-outlook-predictions/
If #10 happens, you can bet the “Affordable Care Act” would be repealed…which would actually be a negative for the healthcare industry.
#6, #7 and #10 also seem inconsistent.
1) Only partially agree. 3 year ECB LTRO will give a 2 month reprieve for shorter maturity treasury debt. Longer maturities will be unaffected and LCH Clearnet will be ultimately be forced to raise margin requirements (Its probably only market depth thats stopped it happening for Italy so far), triggering the next round of Euro panic.
Yes dividends and buybacks are likely on the cards as opposed to expansion/jobs and reducing debt loads.
2) Only partially agree again. I am expecting a first quarter dip based on ISM order backlogs dropping and customer inventories not being depressed. Once it becomes apparent then we should expect FED and political action to combat the drop (despite debt worrys) and a turn round.
3) Yes I agree on China and India still being the growth driver even though they will slow somewhat this year.
4) Only partially agree again. Margin squeezes will begin to show up, with hints already in the ISM prices report. Excluding financial institutions I expect stagnation in US earnings.
5) Mostly don’t agree with this. You might see some quality spread falls , but it is way too early for treasury rates to rise. You need to wait until Europe, UK and Japan all complete their crisis cycles and are resolved, only then does the US start to look different to the rest of the world. This is at least two years or more away.
6 and 7) Probably, since US equities no longer reflect economic activity or earnings, especially if gold corrects this year. At some point in the future things will reverse though.
9) No the surprise this year might well be that structural problems start to appear in the Healthcare, energy and utilities businesses. Financials will most likely yoyo.
10) They might capture the Senate but, I am not sure about the rest. You might see the lowest voter turnout ever though.
“10. Republicans capture the Senate, retain the House, and defeat President Obama”
11. Austerity results in cuts in unemployment insurance, Social Security, and Medicare.
12. US officially enters Great Depression 2.0.
He destroys his own credibility with No. 10 trying to forecast the election. If we are to believe that he has some combination of training, experience, intuition, etc. that qualifies him to make financial prognostications of more use than a coin flip or dart throwing chimp, then he must also believe that there are political analysts who know far better than he what will happen in the upcoming election. That makes his political forecast at best a wild guess, but since he bothered to put it on the list he must feel more or less equally confident about this prediction compared with all his others. That can’t be good news.
#10 He’s short taxes levered up many multiples……
If #10 happens there will be civil unrest in this country as inner cities explode with their 20% unemployment. They have held back so far because Obama is President. OWS will reinvent itself and turn violent. Conspiracists would posit that is why Obama was elected in the first place–they saw what was coming.