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Bond Buyers Making 'Ludicrously Conservative Assumptions': Bob Doll

As the 10-year Treasury yield hit 1.908 percent by Tuesday morning, the lowest level in 60 years, Robert Doll, BlackRock's chief equity strategist, said investors who are piling into Treasurys rather than investing in equities are using "ludicrously conservative assumptions."

Doll predicted a trading range for the S&P 500 index of between 1,100, its April 9 low, and 1,250, with lots of volatility in both directions. Doll added that he thinks the index will pierce the downside of his predicted range if the U.S. has another recession or if Europe's economic situation worsens.

Doll said the index could rise above the high end of the range if Europe holds it together and the U.S. economy does not head back into recession , an event that he deemed unlikely.

Doll expects the S&P 500 to drop further if European policy continues to be paralyzed, and if a combination of the following occurs: a move toward European nationalization, a breakdown in the euro, the failure of a major European bank, or a recession in Europe. He said the risks of this happening continue to rise, as policymakers are still not able to make significant progress in Europe.

"We're on the brink," Doll said. "We need (a European Central Bank) rate cut, or some faster purchases of ECB bonds, or the guarantee of bank lending as the U.S. FDIC did post the Lehman bankruptcy, or euro bonds—something along those lines to try to break the logjam."

Doll added that he thinks nothing that President Barack Obama will proposeduring his speech on Thursday will be able to improve the U.S. economy, because the proposals likely will not pass.

"I think the market is expecting nothing necessarily good to come from president, so if there is anything good, the market actually could go up," Doll said. "I think it's going to be a non-event, and people are not expecting much."

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