The economy just exited a recession and we’re in a sub-par recovery, so the markets are "entitled to a rest after the big gain," said Bob Doll, vice chairman and global chief investment officer of equities at BlackRock.
“The first stage of the recovery off of a major bear market low is pretty broad and robust, and eventually moves into an earnings-driven phase that is usually more ragged...and perhaps that’s where we’re entering,” Doll told CNBC.
“And so I think after the huge gains to have some digestion would not be out of the question at all.”
“Earnings have done reasonably well because corporations—non-financials especially—did a lot of cost cutting; productivity has been pretty good. So we see these earnings being better than expected. As long as we have better-than-expected earnings in an absence of inflation, it’s hard to see the market having significant downside.”
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Doll advised investors to shift their money and diversify.
“Rotating into more defensive groups is not out of the question,” he said.
“So, for example, we’ve taken some money out of oil services and...put that money into health care. We think to get that diversification makes some sense.”
At the same time, Doll said the GDP recovery will continue.
“We will see after 3 to 4 percent real GDP here in the U.S. in the second half, and 2 to 3 percent next year. That will allow revenues to advance at a sub-par pace with cost cutting, with the productivity improvements which will give us double-digits earnings gains,” he said.
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No immediate information was available for Doll or his firm.