BOB Doll: GOP Will Sweep in 2012

January 6th, 2012
in econ_news

Econintersect:  Bob Doll is the chief investment strategist for BlackRock.  He crystal-ball-2has succumbed to the popular pastime of making predictions for the coming year, a pastime that has almost become an addictive disease.  Financial Advisor Magazine reports the last of Doll’s ten prognostications is that “Republicans retake the Senate and White House, and retain the Senate.”  Presumably the “retain the Senate” is a typo by Financial Advisor, or, if it is a direct quote from Doll, that his crystal ball is functioning better than his proofreader The statement only makes sense if "Senate" is replaced by "House."

Follow up:

Doll makes other predictions.  (Click link to Financial Advisor Magazine in Sources, end of article.)  All of the other nine are macroeconomic and investment market calls.  Prediction number 5 is “Treasury rates rise and quality spreads fall.”  Econintersect does not have access to prior years’ predictions to know how he called Treasury markets before 2011 or 2010.  (See below for his calls for those two years.)  Many have made a bearish call for Treasuries for the past two years even as they have experienced a historic bull market.  It may seem obvious that a bearish call must eventually work because the bull can’t keep charging until the ten-year bond pays 0% interest.

Or can it?

Econintersect has located Doll’s predictions for 2011, published Jan 5, 2011 by BusinessWire:

1.


US growth accelerates as US Real GDP reaches a new all time high.


2.


The US economy creates two to three million jobs in 2011 as unemployment falls to 9%.

3.


US stocks experience a third year of double-digit percentage returns for the first time in over a decade as earnings reach a new all time high.


4.


Stocks outperform bonds and cash.


5.


The US stock market outperforms the MSCI World Index.


6.


The US, Germany and Brazil outperform Japan, Spain and China.


7.


Commodities and emerging market currencies outperform a basket of the dollar, euro and yen.


8.


Strong balance sheets and free cash flow lead to significant increases in dividends, share buybacks, mergers & acquisitions and business reinvestment.


9.


Investor flows move from bond funds to equity funds.


10.


The 2012 Presidential campaign sees a plethora of Republican candidates while President Obama continues to move to the center.

The only specific mention of bonds is in item 4.  The results there:  S&P 500 total return for 2011 was 1.85% (NYSE:SPY, including dividends, calculated from data at Yahoo Finance) while the return for long-term Treasuries was 33.0% NYSE:TLT, including dividends, calculated from data at Yahoo Finance).  A Tsunami washed over Doll’s 2011 outlook for Treasuries.

The same BusinessWire article lists the scorecard for Doll’s 2010 prediction results:

1.


The US economy grows above 3% in 2010 and outpaces the G-7.

Score = Correct


2.


Job growth in the United States turns positive early in 2010, but the unemployment rate remains stubbornly high.

Score = Correct


3.


Earnings rise significantly despite mediocre economic growth.

Score = Correct


4.


Inflation remains a non-issue in the developed world.

Score = Correct


5.


Interest rates rise at all points on the Treasury curve, including fed funds.

Score = Incorrect


6.


US stocks outperform cash and Treasuries, and most developed markets.

Score = Correct


7.


Emerging markets outperform as emerging economies grow significantly faster than developed regions.

Score = Correct


8.


Healthcare, information technology and telecommunications outperform financials, utilities and materials.

Score = Incorrect


9.


Strong free cash flow and slow growth lead to an increase in M&A activity.

Score = Correct


10.


Republicans make noticeable gains in the House and Senate, but Democrats remain firmly in control of Congress.

Score = Half-correct

There we see that he was again incorrect on his call for Treasuries (prediction 5).

If at first you don’t succeed, try, try again.  Eventually all pendulums reverse direction, although, after more than 20 years, it has not happened in Japan.  Maybe Doll can hope that his political crystal ball is better than the one he uses for bonds.

SourcesFinancial Advisor Magazine, BusinessWire (Predictions for 2011) and Yahoo Finance










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