Bob Doll: we don’t need risk or reward, just calm

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The market’s best outcome for now is a neutral one, with no major swings up or down, according to BlackRock’s chief equity strategist Bob Doll.

In his weekly investment commentary, the veteran portfolio manager said US stocks are beginning to show a clear trend in the right direction off the back of strong employment data coming out of the country.

But Doll was quick to admit it is a fragile situation at present and stressed this growth would benefit from a sustained period of stability.

He said: ‘What we are really looking for is an environment that is not worse than what is expected. In other words, we do not need to see risks vanish or tremendous upside surprises for equities to perform well — merely having an “OK” backdrop should be good enough for stocks.’

However, Doll said confidence in the markets remains low and concerns linger over the increasingly complicated discussions on restructuring Greek debt.

‘We believe markets are still pricing in a more negative economic backdrop than what we are predicting. Investor confidence remains low and many are still sitting on large amounts of cash,’ he said.

Doll said the markets are preparing for some sort of default but questions remained as to whether Greece could do so in an orderly fashion or see a scenario where it ‘simply walks away from its obligations’.

In addition to the eurozone, Doll said there are potential issues in the US labour market if an extension to the payroll tax cut and unemployment benefit are not extended beyond the end of February. This, he said, could adversely affect spending levels.

Hedging his bets on a macro level, Doll said there was also an ‘always-present risk’ of a major geopolitical event coming to the fore and acting as a drag on the economy or driving down risk assets.

‘We are not expecting to see uninterrupted smooth sailing from here, but we do believe that the trends for stocks are pointing in the right direction,’ added Doll.