BlackRock's Bob Doll: Stocks Likely to 'Struggle' in Near Term, 'Grind Higher' over Long Haul

Excerpt from BlackRock Global Chief Investment Officer of Equities Bob Doll's September 28, 2009 weekly investment commentary:

...barring disastrous market activity over the next few days, September should mark the seventh consecutive up month for stocks...

... we have no expectation that the Fed will begin tightening policy any time soon.

We believe that while the broad financial crisis is largely over, the economic crisis is only halfway completed. True, we do believe the recession has ended, but the recovery has only just begun. The economic recovery will likely require a period of years to return the US to trend levels of activity. This means that we are likely to see continued high levels of unemployment and ongoing deflationary pressures for some time... we would also point out that commercial banks are still experiencing credit contractions despite their improved abilities to raise capital and their reduced reliance on government funds and guarantees. We would argue that a healthy commercial banking system is one of the prerequisites for a sustained economic recovery and an ongoing equity bull market, and if the contraction in bank credit persists, we would have to adopt a more cautious outlook.

To us, this backdrop indicates that it should not be surprising if stocks struggle in the near term, and volatility should remain an ongoing issue. Over the longer-term, however, a combination of supportive monetary policy, low inflation and positive economic growth levels, combined with reasonable valuations, suggest that stock prices should continue to grind higher.