A few forward-looking gems from Bob Doll, chief investment officer over at BlackRock (for the record, BlackRock is not forecasting recession):
• From an investment perspective, fiscal and monetary stimuli obviously are supportive for equities, but it will be some time before their full effects will be felt in the markets. There are some additional important tailwinds for stocks, including increased buying activity by corporate insiders, increases in mortgage refinancing, low global bond yields and corrections in commodity prices, including oil. Over the longer-term, we remain positive on the outlook for equity markets and expect that stocks will outperform both bonds and cash over a one-year time horizon.
• Looking ahead, we remain concerned that earnings expectations for all of 2008 are too high. While expectations have come down for the first and second quarters, the consensus is still looking for earnings over 20% in the third and fourth quarters, an expectation that we believe is unlikely to be met.
• Technical factors are likely to dominate in the weeks ahead, meaning that price momentum and investor sentiment are more likely than earnings, valuations, monetary policy and fiscal stimulus to determine market direction. From a technical perspective, stocks appear to be oversold, and indicators are extreme enough to signal that a price bottom may be in place. However, major setbacks typically take the form of a "double bottom," meaning that after the first sharp recovery, prices head back down to test the low (but with less volume and intensity), a process that usually can take some time. Should that pattern remain in place, investors will be in for a continued bumpy ride.