BlackRock Inc. is generally bullish on the U.S. economy for 2011, according to Robert C. Doll, vice chairman and chief equity strategist for fundamental equities at the investment management giant.
"We'll likely repeat the theme from last year that cyclical stimulus--meaning fiscal and monetary policy--beat out structural problems of big debts and deficits," Doll said at Tuesday's press briefing. "We expect the economy to continue to muddle through with higher quality, higher quantity growth that is still, unfortunately, sub-par growth."
Equity markets and risk assets in general "will continue to grind higher, plus," in 2011, he said. "The difference is if we get it wrong, we think it's likely we'll be too pessimistic, and not optimistic enough."
"We believe the risks in both the economy and equities markets in 2010 were more to the downside, but in 2011 will more likely be to the upside," Doll added.
Risk assets like equities and high yield bonds outperformed safe assets like Treasuries and cash by roughly 15% in 2010, and likely will continue to do so in 2011, he said.
Among Doll's predictions:
* The country's real GDP will move to all time highs during this year's first half. "Sometime, most likely in second quarter, we'll exit recovery and begin an expansion, which will be more about sustainable growth," Doll said.
* The Federal Reserve is likely to keep interest rates near zero throughout the year.
* Job growth will improve this year, with unemployment falling to about 9% from the current 9.8% rate. The U.S. economy will create 2 million to 3 million jobs versus more than 1 million jobs created last year, thanks to the extension of the Bush tax cut and waning fears of a double dip recession.
* As they did in 2010, stocks will outperform both bonds and cash in 2011. "Stocks pulled ahead of bonds beginning in 2010's fourth quarter, and we expect the trend to continue in 2011," Doll said.
Regarding international investing, Doll believes the U.S. stock market will likely outperform the MSCI World Index for the second straight year.