At the beginning of the year, most equity strategists were reluctantly bullish on stocks for 2012.With stock now surging, strategists have grown increasingly worried about a near-term sell-off / correction / consolidation or whatever you want to call it. But many are also maintaining their longer-term bullish stances.
Bob Doll, BlackRock’s Chief Equity Strategist, is one of those voices who is warning of an impending, yet mild “consolidation.”
From Doll’s Weekly Investment Commentary:
Our Market View Remains Positive, but a Consolidation Is Likely
Notwithstanding last week’s modest setback, risk assets have enjoyed a strong run over the past couple of months as reduced fears from the European Union financial problems and a better economic climate in the United States have driven investors back into stocks and other risk asset classes.
Our view is that the “risk on” trade is the right one in the long term given that the world’s major economies are healing and that debt problems are slowly improving. It is important to remember that these processes will not occur in a straight line and we will see setbacks along the way. The rise in risk asset prices, however, has been in a more-or-less straight line, with US stocks rising close to 25% over the past four months. As a result, at some point we will almost certainly see at least a pause in the upward move as markets experience some sort of consolidation or corrective action.