Predictions for 2011 by BlackRock’s Bob Doll
● U.S. stocks will record 3rd straight year of double-digit gains
● US Real GDP Will Hit All Time High in ’11, Marking Economy’s Transition from Recovery to Expansion
“Our expected gains for the equity markets for 2011 are not much different from what we expected for 2010,” he said. “What’s different for 2011 is that market risk will be more to the upside than was the case in 2010.”
The possible upside factors include an acceleration in jobs gains, a surprise in real GDP, earnings exceeding expectations as occurred in 2010, and Washington D.C. beginning to address the nation’s fundamental debt and budget problems. On the other hand, Doll’s “what can go wrong?” list includes the possibility of credit problems resurfacing (including US housing, sovereign nations, and state and local governments), commodities price increases causing profit margin pressure, inflation fears, a greater than expected rise in interest rates, undue emerging markets tightening to curb asset bubbles, and
currency and capital flow concerns leading to protectionist trade wars.
Blackrock, Jan 5
US Economic and Interest Rate Outlook, January 2011
With regard to 2010 real GDP growth, we now expect Q4/Q4 growth of 2.9% vs. 2.3% in the November forecast Based on Q4 forecast. 2010 available data, real GDP appears to be coming in at an annual rate of 3.6% rather than the 1.9% we were projecting in November. In addition, the Commerce Department revised up Q3:2010 real GDP growth from 2.0% to 2.6%.
Northern Trust, January 2011
Grubb & Ellis 2011 Forecast
Grubb & Ellis expects GDP growth in the range of 2.5 to 3 percent in 2011, still a little below the economy’s long-term growth potential of around 3 percent. U.S. companies are sitting on record cash reserves of nearly $2 trillion, some of which they will deploy as demand from businesses and consumers expands modestly. Employers are likely to add 1.5 million net new payroll jobs, right at the level needed to accommodate the growing labor force, which means that the unemployment rate will remain stubbornly high.
Grubb & Ellis, January 2011
Monster U.S. online jobs index 130 in December
A monthly gauge of online labor demand in the United States in December edged down from the previous month, but was 13 percent above the reading from a year ago, a private research group said on Thursday. Monster Worldwide Inc., an online careers and recruiting firm, said its employment index fell to 130 points in December from 134 in November. The current month’s reading is 13 percent above the 115 mark a year ago. Labor demand has been especially strong in areas associated with business investment, including utilities, wholesale trade and transportation and manufacturing, while public sector hiring has lagged, Jesse Harriott, a vice president at Monster, said in an interview.
Reuters, Jan 6
Inflation, Capital Inflows: Asia and the Challenges of Success in 2011
Asia—including the Association of Southeast Asian Nations, industrial and Emerging Asia—is expected to post an average of 7 percent growth in 2011, one percentage point slower than last year, but the region will still need to continue managing its exit from stimulus programs and the large capital inflows pouring into the region, says one of the IMF’s leading economists.
International Monetary Fund, Jan 4
Junk Bond Spreads Narrow to the Least Since November 2007 as Economy Grows
Investors are accepting the lowest relative yields on speculative-grade debt in more than three years as new issues from borrowers such as Charter Communications Inc. rally amid signs the economy is improving…Spreads on junk bonds declined 5 basis points yesterday to 527 basis points, or 5.27 percentage points, Bank of America Merrill Lynch index data show…Spreads have declined from a record 21.8 percentage points in December 2008 as the default rate for U.S. junk bonds fell for a 12th consecutive month in November to 3.35 percent, according to Standard & Poor’s.
Bloomberg, Jan 5
China PBOC’s Zhou: Growth Sound But Inflation Pressure Rising
The momentum of China’s economic expansion remains sound, though inflation pressure is on the rise while quantitative easing by other countries will only add to imported price pressures, People’s Bank of China Governor Zhou Xiaochuan said in an interview with China Finance.
“The extreme conditions of the financial crisis have moderated and external demand is stable. We can maintain stable and relatively fast economic growth with a prudent monetary policy,” Zhou told the central bank-backed magazine.
iMarketNews, Jan 5
Minutes of the Federal Open Market Committee (December 14, 2010)
With the recent data on production and spending stronger, on balance, than the staff anticipated at the time of the November FOMC meeting, the staff revised up its projected increase in real GDP in the near term. However, the staff’s outlook for real economic activity over the medium term was little changed, on net, relative to the projection prepared for the November meeting. The staff forecast incorporated the assumption that new fiscal actions, some of which had not been anticipated in its previous forecast, were likely to boost the level of real GDP in 2011 and 2012. But, compared with the November forecast, a number of other conditioning assumptions were less favorable: House prices and housing activity were likely to be lower, while interest rates, oil prices, and the foreign exchange value of the dollar were projected to be higher, on average, than previously assumed. As a result, although the staff projection showed a higher level of real GDP, the average pace of growth over 2011 and 2012 was little changed from the November forecast, and the unemployment rate was still projected to decline slowly.
Federal Reserve, Jan 4 (release date for Dec 14 minutes)
Obama renominates MIT economist Diamond for Fed Board
President Barack Obama on Wednesday renominated economist and Nobel laureate Peter Diamond to the Federal Reserve Board, sticking with a pick that has already been thwarted by Senate Republicans twice.
Diamond, who won the Nobel Prize for economics in October, together with two other economists for their analysis of labor markets, has been backed twice by the Senate Banking Committee but both times was denied a full Senate vote.
Reuters, Jan 5
Health-care spending rose less in 2009
The nation’s expenditures on health care in 2009 grew by 4 percent, the smallest increase in at least a half-century, according to new federal figures that suggest Americans stinted on medical services as they lost jobs and insurance in the recent recession.
Washington Post, Jan 6