Mid-way through 2011 and BlackRock looks back and forward

By Dian Vujovich

It’s been a decent year for BlackRock’s seer Bob Doll.

At the beginning of this year Bob Doll, BlackRock’s chief equity strategist, put his look-into-the-future goggles on and made some market predictions.

They had to be been pretty much on target because today I received an Investment Commentary email outlining what was said then and where we stood at the end of June. I don’t know too many people who really like sharing that kind of commentary unless they’re feeling pretty good about their predictions.

So, here’s some of how Doll saw 2011 shaping up in January and what he sees happening over the next six months:

•US growth accelerates as US real GDP reaches a new all-time high.

US real gross domestic product growth reached a new all-time high in the first quarter of 2011, so we have already gotten the second half of this prediction correct. The first half will be dependent on the degree to which the US economy is able to accelerate in the second half of this year.

•The US economy creates 2 million to 3 million jobs in 2011 as unemployment falls to 9%.

Employment trends have been uneven so far in 2011, but as of the halfway point of the year, the pace of new jobs growth is above the midpoint of our 2 to 3 million mark. By the end of the year, we are expecting unemployment to be somewhere between 8% and 9%.
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•US stocks experience a third year of double-digit percentage returns for the first time in over a decade as corporate earnings reach a new all-time high.
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In the first half of the year, US stocks appreciated by 6%, so if we are fortunate enough to see that pace continue, US equities would experience double-digit gains for the year. Regarding the second half of this prediction, earnings should reach a new all-time high in the third quarter.
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•Stocks outperform bonds and cash.
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Again, if the first half of the year is any guide, we are on track to get this prediction correct since stocks have outperformed bonds and cash over the first six months of 2011.
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•Investor flows move from bond funds to equity funds.
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Investor flows moved into stocks during the first quarter of the year, but the second quarter saw a sharp outflow of money from stocks back to bonds. We would need a significant reversal of this trend to get this prediction correct.

•The US stock market outperforms the MSCI World Index.

It is close, but as of the midpoint of the year, US stocks have outperformed the MSCI World Index (which was up 5.3%). Although there are a number of risks facing US markets, the same can be said for international markets as well, and we think US stocks remain better positioned than their developed market counterparts.

As for the here and now, Doll points out “the markets continue to face a number of risks.” Included in that bucket of risks are the sovereign dept problems in Europe and the US debt ceiling debate.

Doll’s forecast? “For some time now, we have been arguing that the economy would “muddle through” while markets “grind higher.” That has been the case for the first half of the year, and we expect the second half to be just as good, if not better.”

We’ll see.