Doll, Hyman: Europe in Recession But U.S. Economy Will Surprise to Upside
January 20, 2012
Recently, business news journalist Consuelo Mack sat down with Ed Hyman, manager and co-founder of the ISI Group and Wall Street’s number one economist 32 years running, along with BlackRock’s chief equity strategist Bob Doll to gather their 2012 market predictions and economic expectations.
Most simply and succinctly, Hyman forecasted “that the economy [will] surprise us on the upside.”
The founder of the ISI investment research group expressed his surprise at how “remarkably well” the economy has performed for the last three months. He commented that consumer confidence reports reflect positively on the American public, having improved dramatically over the last month.
Furthermore, when questioned as to the root of the strength, Hyman had difficulty pinpointing a precise explanation for the improvement, calling it “somewhat mysterious” and “broad based.” Overall, he attributed the recent economic expansion in the U.S. to increased consumer spending, heightened employment figures and credit.
However, Hyman cautioned that investors and the public not “get too excited about it;” despite things looking up, the economy is merely doing better, not outstanding.
Doll tended to agree, sharing his hopeful expectation that the U.S. economy will continue to pick up this year.
Still, while he stated that, “the U.S. is going the right direction,” he issued a warning to American investors to be weary of the slowing global market, particularly in Europe and parts of Asia.
“Europe for sure is in a recession in many parts [and] Asia is still slowing down in lots of places,” as well, the long time member of Wealth Track’s brain trust and overseer of BlackRock’s three highly regarded Core, Value and Growth mutual funds, said.
Hyman later chimed in, mentioning the “problematic” nature of Europe given the conflicting policies and cyclical fiscal drag, as opposed to the difficulties China faces, he believes are more manageable.
“They have a monetary policy; they have $3 trillion in cash reserves, and a huge labor force. They have these assets and attributes, plus a steely determination to win economically, whereas in Europe you have a lot of political crosswinds… I’m a lot more relaxed with China.”
Doll went on to say that this has created a divergence in the global environment at this time. He elaborated that it will be “interesting” to observe whether the U.S. will have a positive impact on the world or the rest of the world will contribute to yet another slowdown in the States, forecasting the latter. Nonetheless, with the rest of the globe potentially coming to a halt economically, suddenly the U.S. “becomes a more attractive place” for other nations to put their money.
“That is part of the reason the U.S. stock market, while flat in 2011, was far better than almost any market in the world,” Hyman added.
The interview came to a conclusion with Hyman’s mention of his favorite stocks including Ralph Lauren and Home Depot.
Regardless of the highest highs or deepest valleys the market reaches in 2012, Doll reminds us that economies never go in straight lines and warns that we should resist jumping to conclusions on either end of the spectrum in the U.S.
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