Daily Ticker

BlackRock’s Bob Doll: 2012 Economy Will Be Sluggish, But Stocks Will Still Rise

Follow Yahoo!'s The Daily Ticker on Facebook here!

BlackRock's Chief Equity Strategist Bob Doll has released his 10 Predictions for 2012.

One of these predictions, for the U.S. economy and market, contains what initially seems to be a major inconsistency: Disappointing earnings and rising stock prices.

Doll projects that the U.S. economy will grow 2%-2.5% in 2012, "muddling through" a tough environment without plunging into a double-dip recession. This economic growth, however, will not support the earnings growth forecasts that stock analysts are currently looking for.

Analysts currently expect earnings on the S&P 500 to be $108 in 2012. Doll predicts that earnings will actually come in at about $103.

Although this will be a disappointment relative to current expectations, Doll also thinks that stocks will have a very good year.

Thanks to "multiple expansion"--stocks trading at higher multiples of earnings than they currently do--Doll thinks stocks will rise in "double-digits" in 2012.

And how is this possible, given that Doll also expects earnings to disappoint?

It is possible, Doll says, because stocks are currently depressed because of fears of a blow-up in Europe.

Once investors begin to realize that Europe will not blow up next year, Doll argues, the market's PE multiple should expand. And this, combined with 6% year over year earnings growth, will drive the market up double-digits.

That's Doll's base-case prediction.

Of course, he also acknowledges a "nemesis" scenario in which Europe does, in fact, blow up. If that happens, all bets are off.

SEE ALSO: Bob Doll's 10 Predictions For 2012

View Comments (11)