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Saturday, January 07, 2012

Ed Hyman & Bob Doll's Market Outlook for 2012

This is a summary of a video interview by Consuelo Mack with Ed Hyman and Bob Doll. Ed Hyman has been rated the #1 economist by Institutional Investor for 32 years running and recently named to "All American Research Team Hall of Fame." Bob Doll is the Chief Equity Strategist at Blackrock.

Highlights of 2011:
  • Worst Market Volatility in decades
  • Corporate profits and cash levels are record highs
Video: Summary of Video:
Ed Hyman:
  • Small chance the economy could do a lot better in 2012 than in 2011. Thinks surprises could be to the upside. Says in late 2011 the economy did much better than he thought it could.
  • Thinks the economy will do "somewhat" better in 2012 than in 2011.
  • Is worried we have higher taxes and spending cuts that cycle the economy lower and lower.
  • With slowing inflation, expects more easing in Europe and China which will help.
  • Sees a "dark picture" on Europe but not on China. 
  • Believes Europe will have a severe recession. 
  • Believes rates in Europe will go to zero.
  • Bonds were the best winner last year but if Ed is right, he thinks bond yields will go up and cheered by everyone except those who own them.
  • Hyman likes the emerging market consumer so Ralph Lauren (RL) and in the US dividend paying stocks that are buying back shares such as Home Depot (HD).
  • Doesn't think Obama will be defeated.  Says the market usually likes a change of president so we could get more upside surprise with a new president.

Bob Doll
  • Thinks the US will muddle through while the rest of the world slows.
  • Average GDP growth for 2012 will be 2.0% to 2.5% with quarterly lows maybe 1% and a high of 3%.
  • Thinks US stocks will have a better year aided by money coming from foreign markets to our markets.
  • Thinks recession in Europe will be "mild" and not drag the US down as we "muddle through" unless there are significant "financial busts."
  • China, India and US growth could offset recessions in Europe.
  • Will take a pretty bad world for US 10-year treasury to go from 2.0% to 1.5% for additional capital appreciation. 
  • Thinks if the Euro goes bust, then you don't even want to own stocks.
  • Because earnings growth is in the US, small and mid cap stocks with more business in the US vs Europe will do better than his specialty, large cap stocks.
  • Top investment choice is US S&P500 with accelerating cash flow and earnings.

Both agree stocks are the asset of choice on their own merit and relative to other asset choices including cash and US Treasuries.

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