As credit markets regain their footing and investor confidence rebounds, equity valuations should improve in 2008, allowing the bull market to continue, according to Bob Doll, vice chairman and chief investment officer of global equities at US investment manager BlackRock.

In fact, Mr Doll is predicting that while equities are likely to remain volatile in 2008 due to above-normal uncertainty and below-normal liquidity, stocks will reach new record highs at some point during the upcoming year.

“While we believe investors will face significant risks this year, we remain cautiously optimistic overall,” said Mr Doll. “2008 will hopefully be a year where reflation and liquidity beat out credit issues and fear.”

His ten predictions for 2008 are:
1 World growth dips below trend for the first time since 2002.
2 The US narrowly escapes an economic recession, but experiences a profits recession.
3 The Fed funds rate falls to 3.5 per cent or lower as Treasury bond yields rise.
4 The dollar rises against the euro, but falls against developing market currencies.
5 Stocks achieve a new all-time high in 2008 as price/earnings ratios improve.
6 Large cap and growth outperform small cap and value.
7 Developing economies and equity markets outperform developed ones yet again.
8 Despite rising above $100 per barrel, oil prices end the year lower than where they started.
9 Information technology, healthcare and energy outperform utilities, financials and consumer discretionary.
10. Democrats capture the White House and increase their lead in the Senate, House and governors’ mansions for the first time since 1992.