By Matt Miller and Jeff Kearns Jan. 9 (Bloomberg) -- U.S. investors are looking ahead, and they like what they see, say Barton Biggs and Robert Doll.
The 21 percent rally in the Standard & Poor's 500 Index since Nov. 20 reflects speculation the worst of the recession is over, according to Biggs, managing partner at hedge fund Traxis Partners LLC, and Doll, chief investment officer for BlackRock Inc. Equities will probably keep rising, they said yesterday on Bloomberg Television. Airline shares may gain after crude oil fell 71 percent from its July record, said the New York-based Biggs. Stocks with the biggest price swings will climb as the recession ends, according to Doll. BlackRock is based in Plainsboro, New Jersey. "Sometime around the middle of the year there's going to be pretty conclusive evidence that the economy has stabilized," Biggs said. "That's what the stock market is now looking forward and seeing, and that's why I think that this rally carries further." The Standard & Poor's 500 Index rallied after dropping to an 11-year low on Nov. 20. The benchmark plunged 38 percent in 2008, its worst yearly loss since 1937. Biggs was wrong in February 2008 he said the U.S. stock market is "at or very close to an important bottom." Biggs said airlines "make some sense" because they are cutting costs and getting a boost from lower fuel costs. The S&P 500 Airlines Index tumbled 29 percent in 2008, its fifth straight annual decline. He also favors companies in less-developed countries. "The growth opportunities will be in emerging markets," he said. "They are considerably cheaper than developed markets." Recession Nadir Doll said the worst of the recession is probably over after more than $1 trillion of bank losses froze credit markets in 2008. U.S. gross domestic product may have contracted 4.35 percent in the last three months of 2008, according to the average estimate of economists surveyed by Bloomberg. "The fourth quarter that just ended is likely to be the worst of the recession," said Doll. He said Nov. 20 probably was the bottom for the stock market. Companies reliant on consumer spending to increase earnings led the advance in the S&P 500 since Nov. 20, rising 36 percent. Banks and commodity producers rallied 29 percent. "Risky assets will outperform safe assets this year," he said. "There are going to be horrible earnings but markets have a way of discounting that." Biggs said that it's too early to tell how the alleged fraud by Bernard Madoff will affect hedge funds and the fund-of- funds industry. Prosecutors say Madoff's investment company may have cost clients as much as $50 billion through a "Ponzi scheme." The impact will be seen in the first and second quarters of this year, Biggs said. Hedge funds lost 18.3 percent in 2008, their worst year on record, according to Hedge Fund Research Inc.'s HFRI Fund Weighted Composite Index. The decline was the largest since the Chicago-based firm began tracking data in 1990. http://www.bloomberg.com/apps/news?pid=20601213&sid=aniVfrQCC5Pw&refer=home
