The largest money manager in the world isn’t toning down its bullish outlook for equities. The firm was very bullish coming into 2010 (see here for Bob Doll's 10 for 2010) and has thus far been proven prescient.
In his latest weekly report, Bob Doll, Chief Equity Strategist at BlackRock, says the recovery is picking up momentum. Doll says the job losses are a thing of the past and says jobs may surge by 6 figures this month:
As we have been discussing for some time, the key economic variable that most are watching is the employment picture. From our perspective, we believe the jobs shedding phase appears to have ended, although new jobs are still not being created. We are optimistic that this scenario will change in March. Decreases in unemployment claims, one of the strongest leading indicators of payrolls, have accelerated in recent weeks. We are forecasting that payrolls may increase in the six-figure range for the current month. Factoring in the hiring of census workers, we would not be surprised to see that number top the 200,000 mark.
Doll says the recent fears in China should be closely maintained and that sovereign debt fears could continue to contribute to market volatility. Although the global tightening phase has begun, there should be substantial lag time between the beginning of rate increases and actual economic impacts:
Equity markets do continue to face some risks. In addition to the prevailing economic uncertainty, investors are concerned about the prospects of premature policy tightening in markets around the world, including China. Meanwhile, credit-related problems such as those surrounding Greece’s debt remind us that deflationary pressures have not vanished. Many are also concerned about the Fed’s strategy for exiting its current accommodative stance, although we think that even when the Fed does begin to raise rates, it will take quite some time before short-term rates move into restrictive territory. Additionally, state and local governments remain under pressure and concerns about the effects of protectionist trade policies present some risks.
None of this is a reason to turn bearish, however as the positives outweigh the negatives:
On balance, however, we continue to believe that the positive factors outweigh the negatives. Credit conditions are improving, we expect employment to increase, the Fed remains accommodative, inflation threats are absent and corporations are ramping up merger and acquisition activity. In all, we expect a prevailing equity friendly environment will help stock prices continue to rise over the long term.