Savvy investors who remain overweight in equities will see stocks setting new record highs in 2008, Bob Doll predicts.
Doll, the high profile BlackRock global equities CIO, expects equities to outperform other asset classes this year, despite the likelihood of further above-normal market volatility.
In his annual Ten Predictions for the year ahead, Doll says it will be a “close call”, but the US should escape a recession.
“Continued economic growth in the US will require export strength, reliance on strong balance sheets and income statements among non-financial companies, avoidance of significant employment layoffs, and an accommodative Federal Reserve. In our opinion, these factors are more likely to occur than not,” he says.
“The key to our cautiously optimistic outlook is for the US economy to avoid a slump deep enough to dampen long-term earnings expectations, which could end chances for a market re-rating and undermine the global economy.”
Doll says individual stock selection will be increasingly important this year, as fewer stocks outperform their indices.
“In 2008, large companies and growth will win again, as US multinationals perform as well as most developed markets,” he says.
“From a geographic perspective, we believe it is possible that the US will outperform other developed markets, but emerging markets should once again be the winners,” he said.
The IT, healthcare and energy sectors will remain in favour, Doll expects, but financials and consumer discretionary areas should be avoided.
“While we believe we may be due for some sort of cyclical downturn in oil and other hard commodities, the fundamental long-term secular case for commodities remains sound,” he says.
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