BlackRock's Doll sees solid 2009 U.S. stocks gains

NEW YORK (Reuters) - The U.S. stock market could gain as much 12 percent in 2009 from current levels, despite a recession that will last at least into the first half of the year, a top executive with asset manager BlackRock said on Tuesday.

Robert Doll, chief investment officer of global equities at the largest publicly traded U.S. asset manager, said the Standard & Poor's 500 .SPX could hit 1,000 to 1,050 by year-end, and emerging market equities would fare even better.

"With record fiscal and monetary stimulus, substantially lower oil prices, much cheaper valuations, significant negative sentiment and lots of cash on the sidelines, it is likely that stocks will begin to look 'over the valley' sometime in 2009 and experience a noticeable rally," Doll said at a press briefing.

The bottoming process for U.S. equity markets began on October 10, 2008, when the S&P 500 closed below 900, and was confirmed by a second market low on November 21, when the S&P hit an 11-year low, Doll said.

Any economic recovery, however, will likely be muted and market volatility will continue throughout 2009, Doll said.

"We should see multiple-digit percent rallies as well as declines all through the year" in U.S. stocks, he said.

Doll expects global economic growth to be below 2 percent this year for the first time since 1991, and U.S. gross domestic product to be negative for at least the first half of 2009, which would mark the longest and deepest U.S. recession in more than 50 years.

U.S. STOCKS SEEN BETTER VS EUROPE

This year, U.S. equities should outperform European stocks, he said.

A better capital situation in the U.S. and a slower policy response in Europe are among factors that will cause European equities to lag their U.S. counterparts, he said.

Shares in emerging markets, in the meantime, are poised for a stronger rebound than those in developed markets due to a steeper drop in 2008 and a recovery from less painful, cyclical economic downturns rather than more severe, structural ones, he said.

Among sectors, Doll sees energy, health care and technology outperforming utilities, financials and materials in 2009.

"From a sector standpoint, we prefer health care for defensiveness, information technology for some stability and some cyclicality, and energy for cyclicality and cheapness," he said.

With an expected improvement in economic activity in the second half of 2009, Doll expects higher demand for commodities, with crude oil trading between $60 and $80 per barrel.

In New York, crude futures were down 12 cents at $48.69 in midday trading on Tuesday, well below the record peak of about $147 set last July.

The U.S. budget deficit is expected to rise above the $1 trillion mark in 2009, while the Treasury market yield curve, or the gap of longer maturities' yields over shorter maturities, is expected to steepen through the end of the year, he said.

Doll expects the yield spreads of corporate and municipal bonds over Treasuries will narrow this year as investors will likely tip-toe back into these riskier assets and away from low-risk Treasuries, whose yields are hovering at historic lows.

"As fear levels recede and confidence is slowly rebuilt, risky assets can begin to outperform safe assets once again," he said.

(Editing by Leslie Adler)