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BlackRock's Doll: Market Outlook and Stock Picks

Published: Thursday, 5 Nov 2009 | 10:09 AM ET

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By: JeeYeon Park
CNBC News Associate

The Federal Reserve on Wednesday expressed confidence that an economic recovery is building, although it said it will keep borrowing costs near zero for "an extended period." Is this good news for investors and the markets? Robert Doll, vice chairman and global chief investment officer of equities at BlackRock, shared his insights.

“Our economy is not functioning normally, and the banking industry is not functioning normally—not lending like the Fed would like to see,” Doll told CNBC.

“And in that environment, they still have no choice but to provide that stimulus. For equity investors, that’s a good thing, because much of that stimulus finds its way first into the markets before it finds its way to the real economy.”

Doll said it will be a “slow, steady, multi-month process” before the Fed eventually raises interest rates.

“Investors have to start thinking less about liquidity, multiple or P/E improvement, and more about earnings to drive the markets,” he said. “So that shift, where the market typically has a tough sledding as it transitions, is the beginning of where we are today.”

Investors should focus on where the earnings and revenue growths are going to come from, said Doll. He added that he expects the S&P 500 to end the year at 1,000 to 1,050.

“We need to see more topline improvement,” he said. “We saw more in the third [quarter] than the second, and we’ll see more in the fourth. Earnings drivers are what we’re looking for these days.”

Doll suggested the following "higher quality" stock strategy for investors:

"Having quality in the portfolio—strong balance sheets, good free cash in the income statements—we think are hallmarks for success over the next few months," he said.

Doll’s Picks:

Microsoft [MSFT Loading... () ]