U.S. stocks will return at least 10 percent in 2012, beating foreign markets for a third year, while Treasury yields climb, according to BlackRock Inc.’s Bob Doll.
The nation’s gross domestic product will expand by 2 percent to 2.5 percent, while earnings trail analyst estimates for the first time since the last recession, Doll said in a statement released at a BlackRock event in New York today. He is the chief investment officer for global equities at the world’s biggest asset manager.
“If companies continue to deliver -- and there are a lot of reasons why they are -- stocks should continue to do well,” Doll said during the presentation. He said the European economy will contract because of the region’s sovereign-debt crisis. “The headwinds of delevering will cause growth to be somewhat slow,” he said.
Forecasters at securities firms are more conservative about U.S. stocks than any time in seven years, predicting the S&P 500 will rise 6.9 percent in 2012 as budget deficits around the world limit gains. The benchmark gauge will climb to 1,344 after it was virtually unchanged in 2011 and the U.S. beat every equity market in the developed world except Ireland, according to the average forecast of 12 strategists tracked by Bloomberg.
Doll said today that the S&P 500 may exceed 1,350 this year. He gave the same forecast a year ago. The stock index ended 2011 at 1,257.60, and today rose 0.3 percent to 1,281.06.
“The one that disappointed me the most was the stock market one,” Doll said of his missed prediction last year. “Expecting double-digit gains in the back of earnings, we got the earnings part right but we didn’t anticipate how severe the European debt crisis would be.”
In January 2011, he also said U.S. economic growth would increase to almost 4 percent and the unemployment rate would drop to about 9 percent. GDP expanded 1.8 percent last year, according to the median economist projection, and the jobless rate retreated to 8.6 percent.
Health-care and energy stocks will perform better than utilities and financials, he said today. Doll expects dividends and stock buybacks to rise by 20 percent or more this year.
The worst-performing stocks last year were the American companies that retained cash, and the best were the ones that gave money back to investors through dividends and buybacks.
Companies that hoarded cash such as CareFusion Corp., Western Digital Corp. and 18 other members of the Standard & Poor’s 500 Index lost an average 15 percent in 2011 through Dec. 16, according to data compiled by Bloomberg. The 40 that repurchased the most stock or offered the biggest dividends climbed 5.7 percent.
“If there’s any mania developing in the stock market, it’s around dividend-paying stocks,” Doll said. “We love dividend-paying stocks, but only those dividend-paying stocks that have positive cash flow to raise their dividends.”
He said that unemployment will continue to decrease at a “grudging pace because we are in a post-credit-bust world.” Applications for jobless benefits decreased 15,000 in the week ended Dec. 31 to 372,000, Labor Department figures showed today. The average over the past four weeks declined to the lowest level in more than three years.
Republicans have a “strong chance” of winning a majority in the Senate and retaining the House of Representatives, and Mitt Romney is likely to win the presidency, Doll said.
While it will “be difficult for Europe to get back on its feet and be healthy anytime soon,” the region’s sovereign-debt crisis will ease because much of the damage has been done already, he said.
The European Commission reduced its 2012 growth forecast by more than half to 0.5 percent in November. What began as a Greek deficit problem in 2009 has become a threat to the international financial system amid investor concern that nations including Italy may struggle to repay debt.
Emerging markets will continue to be a “critical part of global growth,” with China accounting for more than 40 percent of worldwide expansion and India and the U.S. making up about 15 percent each, Doll said.