US Economy Will "Muddle" Through 2012 -BlackRock's Doll

The U.S. economy will face headwinds this year, but see positive growth as long as the euro zone doesn't implode, says the equity chief at BlackRock. He also sees the Republicans capturing both Congressional houses and defeating President Barack Obama.

Robert Doll, chief equity strategist at investment firm BlackRock, laid out his investment outlook for 2012 at a breakfast Thursday. In his view, the euro zone is "the big swing factor" in the global outlook. He doesn't see Europe solving its debt issues entirely but it will make enough progress to ease the crisis.

"Failure to advance this effort could be disastrous," Doll warns.

Looking at the U.S., Doll expects the economy "muddles through" with growth between 2% and 2.5% and "positive but mediocre" job gains.

On the financial markets, Doll is projecting a gain of 10% or more on the stock market. Although 2012 earnings growth will slow to about 6%, from about 14% in 2011, he expects a modest uptick in valuations will pick up the slack.

Doll also thinks--that despite likely turbulence from Europe in the coming months--financial markets have already seen the peaks in volatility and correlation. He also expects dividends and buybacks will hit a record high this year.

The BlackRock chief thinks if Washington leaders can agree a package to deal with the federal deficit, the results would slow economic growth but boost market confidence.

Looking further into political potentials, Doll expects the Republicans to capture the Senate, retain the House and defeat Obama.

For investors, the presidential campaign may mean less than the Congressional races. Doll points out equity markets, on average, have returned 15.1% annually under a Republican-controlled Congress regardless of who occupies the White House.

-By Kathleen Madigan, Dow Jones Newswires; 212-416-2466; kathleen.madigan@dowjones.com

--Jonathan Cheng contributed to this article.

State Street (NYSE:STT)
Historical Stock Chart
From May 2024 to Jun 2024