BlackRock sees double-digit ’09 equity gains

The U.S. equity market is likely to see a double-digit gain this year, while the economy shrinks by 2%. Those are among the market and economic predictions for 2009 by Robert C. Doll, vice chairman and chief equity investment officer of New York-based BlackRock Inc. Speaking at a gathering of reporters to discuss his firm’s 2009 investment outlook, he said he expects the Standard & Poor’s 500 stock index to end the year in the 1,000-1,050 range, reflecting a stock market recovery in anticipation of a rebound in corporate earnings in 2010. “Corporate earnings, which fell by a double-digit percentage in 2008, will likely fall by double digits again in 2009 — marking the first such back-to-back declines in earnings since the early 1930s,” Mr. Doll said. He said 2009 will be characterized by the economy’s teetering between debt-induced deflation and policy-induced reflation. But Mr. Doll said that his biggest worry is about deflation. “If we’re wrong in our projections about avoiding a severe downturn, then all bets are off,” he said. Mr. Doll’s other major predictions include the first nominal decline in U.S. gross domestic product in 50 years, a decline in global economic growth to 2% for the first time since 1991, a decline in inflation in developed countries to almost zero and a U.S. Treasury curve that will end the year higher and steeper than where it began. He also believes that stock market volatility will remain high, oil and other commodities will move higher by yearend, U.S. stocks will outperform European stocks, and emerging-markets stocks will outperform stocks of developed nations.