“Good enough” support for risk assets

A new briefing note from Bob Doll, chief equity strategist of fundamental equities at BlackRock, suggests that whilst euro risks remain in place, there is “good enough” support for risk assets.

Within the briefing note, he expects to see economic growth in the United States continue to grow at a slow but positive pace in 2012.

He has noticed continued improvements in the US housing market, which is a sector critical for the overall economy as it is closely correlated with factors including consumer net worth and confidence levels.

Also noted is the approach taken by the Federal Reserve, with their focus on supporting economic growth with interest rates kept exceptionally low for some time.

All of these trends in the US are considered “good enough” for risk assets such as equities.

There are also downside risks to consider.

Within the US, Doll notes a murky outlook for fiscal policy. It is difficult to see what will happen with existing fiscal and tax policies which are due to expire at the end of this year.

Outside of the US, a number of countries (including China, France and several Middle East nations) could experience leadership changes this year. The sort of investor anxiety surrounding elections could apply to around half of world GDP as represented by countries.

He notes that the European sovereign debt crisis remains the central downside risk for global financial markets.

In his opinion, the crisis would likely worsen if European policymakers took their time in addressing the escalating problems.

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