While Europe’s precarious financial state continues to haunt investors, there are still reasons to be optimistic, and the resulting recovery will play out like a “tug-of-war,” Bob doll, chief equity strategist at Blackrock, told CNBC Monday.
“I think cyclicals have come under more pressure,” Doll said.
“The debate between consumers’ need to pay down debt and governments’ need to pay down debt, against the positive cyclical recovery coming from stimulus in terms of jobs, etc. is going to be a tug-of-war.”
Stocks in both the US and Europe plunged on Friday due to fears over the European debt situation. But Doll said he remains optimistic on the recovery.
“In the US we still have leading economic indicators moving higher, low inflation, low interest rate market,” he said.
The euro fell to its lowest level in four years Monday as investors abandoned the currency as well as stocks in favor of gold and other less-risky assets.
“The pace of change (of the euro) has been huge,” Doll said.
"It reflects the ongoing problems of Europe, some more fiscal austerity measures (and) what that’s going to mean for global trade.” “Among countries in Europe, Germany is best positioned” to benefit from the weak single currency, he added.
Doll shook off bearish oil indicators, saying that there are “some (oil) companies with decent cash flows.” Oil hit a three-month low on Monday, as prices fell below $70 a barrel, more than 18 percent lower for the month of May, reflecting investors’ concerns on the weak euro and high oil inventories.
“I think as long as you believe in global cyclical recovery, pressure on oil is upwards,” Doll said.
But Wall Street remains vulnerable to European market instability, he said, pointing out that "the S&P 500 gets 15 percent of its earnings from Europe."