A “double-dip” recession is unlikely, even as corporate earnings and economic reports raise fresh concerns over the strength of a global recovery, said Robert Doll, of BlackRock Inc., the world’s largest asset manager.
U.S. stocks have the potential to climb higher in the second half of this year, Doll, BlackRock’s vice chairman, said in a Bloomberg Television interview. Futures on the Standard & Poor’s 500 Index dropped as much as 0.5 percent today after a report showed U.S. home-builder confidence fell more than forecast, fueling concern the recovery is faltering.
“My view is that we will not have a double dip, and that we’ll work our way higher, but maybe not just yet,” Doll said. “If we can get through the second quarter with earnings reasonably good, revenues reasonably good versus expectations, that will be a good down-payment on getting out of what ails us in this period.” Earnings have been “okay, but not great,” he said.
The S&P 500 index rallied 23 percent in 2009 as governments worldwide mounted stimulus programs to counter a global recession. This year, it has lost 3.9 percent as European budget deficits and China’s steps to curb asset bubbles looked like threatening a recovery.
Speculation of a double-dip recession intensified this month as reports pointed to a contraction in U.S. manufacturing and slowing economic growth in China, and after companies from Google Inc. to General Electric Co. and Citigroup Inc. reported earnings or revenue that missed analysts’ estimates.
“If this is just an ordinary cyclical slowdown, which is my view, stocks will have a better second half,” Doll said. Even as China’s growth slows, the world’s most populous nation will continue to spur a global recovery and drive up stock markets, particularly in developing nations, he said.
“China is a potent force of growth,” said Doll. “We do think they have the muscle to help continue the emerging markets being the leader of the world’s growth scene.”
BlackRock is “overweight” U.S. stocks within its developed markets portfolio because of the “significant stimulus” ploughed into the economy over the past two years, Doll said.
“We’re overweight, but not as much as before, the emerging markets,” he said. “Our preference is to play them through the multinationals.”
In January, BlackRock predicted the S&P 500 may end the year at 1,250, which is almost 17 percent above yesterday’s closing level.