The White Bread Consensus

BlackRock’s Bob Doll is out with his weekly commentary and a look ahead at 2012.  Doll’s stuff is helpful to be aware of for two main reasons:

a) BlackRock (his shop) runs a trillion dollars – they are the market.

b) His views, while typically bullish, rarely stray from the mainstream.  Bod Doll’s outlooks and forecasts are white bread.  And white bread is fine, there’s nothing wrong with that.

We re-learned last year how important psychology and sentiment and expectations are – the year was broken up in half with an “upbeat” range from January through April followed by a “downbeat” range from summer through year-end.  The turning point was early August when psychology and sentiment trapped us below a resistance line that was formerly support.  Forget the jargon – just look it at the boundary past where buyers lost interest and people were willing to sell.

So back to Bob.  Bob’s outlook is essentially the orthodox view of what is likely (more muddle through), what can go right (Euro resolution, 2 to 2.5% GDP growth) and what can go wrong (China hard landing, Euro breakup).

His 10 predictions for the year are below – they are the key to understanding the market’s expectations, your fellow investors’ “base case scenario”:

10 Predictions for 2012

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:

  1. The European debt crisis begins to ease, even as Europe experiences a recession
  2. The US economy continues to muddle through yet again
  3. Despite slowing growth, China and India contribute more than half of the world’s economic growth
  4. US earnings grow modestly, but fail to exceed estimates for the first time since the Great Recession
  5. Treasury rates rise and quality spreads fall
  6. US equities experience a double-digit percentage return as multiples rise modestly for the first time since the Great Recession
  7. US stocks outperform non-US stocks for the third year in a row
  8. Dividends and buybacks hit a record high
  9. Healthcare and energy outperform utilities and financials
  10. Republicans capture the Senate, retain the House, and defeat President Obama

So now the question for you becomes: How do my views differ from the mainstream and how do I express this contrarianism in a trade or a position?


10 Predictions for 2012 (BlackRock)



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