2Q09 BlackRock Asset Allocation

1. EQUITIES FIXED INCOME REAL ESTATE LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS
Asset Allocation and
Global Market Views
SECOND QUARTER 2009
Asset Allocation Views
Credit issues and economic uncertainty have continued over the past several months,
and we continue to encourage investors to approach financial markets cautiously.
On the bright side, however, there recently have been some renewed signs of investor
confidence and signals that some areas of the global economy may have begun
to recover, although a number of downside risks remain. From an investment
perspective, it is important to remember that financial markets are forecasting
mechanisms, meaning that markets tend to show signs of recovery before the actual
economy does. As such, we do believe that higher risk assets should outperform
over the course of 2009, but, high levels of volatility are likely to continue.
The Global Market Outlook and Asset Allocation
Equity Markets Views for US Investors represents the collective
economic and investment opinions of some
• A bias toward higher quality continues to make sense, and we retain our
of BlackRock’s senior investors, including
conviction that the most compelling values can be found in higher-quality
Bob Doll, Vice Chairman and Global Chief
companies that have relatively strong balance sheets, healthy levels of free
Investment Officer of Equities; Curtis Arledge,
cash flow and adequate financing.
Co-Head of US Fixed Income; Peter Fisher,
• It would be appropriate, however, to take on some lower-quality and more Co-Head of the Fixed Income Portfolio
cyclical investments in anticipation of economic recovery. Management Group; Ewen Cameron Watt,
• Regarding geographic opportunities, among developed markets we continue Chairman of BlackRock’s Central Strategy
to favor overweight positions in US stocks. Group and a member of the Multi-Asset
Portfolio Strategies (MAPS) Management
• The long-term case for investments in emerging markets remains intact. In
Team; Richard Urwin, Head of Investments
particular, we favor investments in Asia ex-Japan and in Latin America.
for BlackRock’s Fiduciary Mandate Investment
• We favor healthcare, energy and technology. Team; and Scott Thiel, Co-Head of Global
Fixed Income Markets Fixed Income. These views do not necessarily
reflect the investment decisions made within
• Given the ongoing difficulties in the economy, we continue to advocate a
specific BlackRock portfolios.
focus on higher-quality investments.
• High-quality securitized assets and selected areas of the credit markets
currently look attractive to us.
• We continue to see better relative value in agencies versus Treasuries in
light of ongoing strong government support.
• The municipal market continues to offer attractive yields when compared
to taxable alternatives and represents compelling long-term value.
Currencies and Commodities
• Should investor confidence continue to improve, the US dollar would continue to
weaken, but should risk-aversion take an upturn, the dollar would strengthen.
• Oil prices will likely rise through the year as evidence of an economic
recovery becomes more clear.
NOT FDIC INSURED I MAY LOSE VALUE I NO BANK GUARANTEE

2. Equity Markets
Economic Trends Global equity market volatility has continued in recent months, with stocks sinking
Preliminary data indicates that deeply in January and February as economic data continued to worsen and investors
grew uncertain about policymakers’ next steps in combating the credit crisis. Since
the first-quarter decline in global
early March, however, global equities have rallied strongly, reflecting several factors:
gross domestic product (GDP) was
technically oversold conditions; aggressive global policy actions, and a general
approximately 1.5%, the same as it sense that the global economic recession may be moving past its period of great
was in the final quarter of 2008. There weakness. While current economic indicators are consistent with a global
were, however, some important economy that is still declining (at a less rapid rate), equity markets appear to be
changes in the quarter’s economic anticipating an economic recovery. It is important to recognize, however, that any
releases, which helped produce a recovery is likely to be muted and that equity markets will remain highly sensitive
to economic data releases.
sense that the economic recession
may have peaked. Firmer consumer The question is whether the present rally marks the end of the bear market, or if
consumption patterns in the United it merely represents a temporary bounce from oversold conditions. It would be
premature to suggest that a new bull market has emerged or that we have seen the
States and Europe, some hints of
end of the see-saw patterns that have been in place since last fall. Nevertheless,
demand stabilization in the UK
we do believe there are several important differences between the current rally
housing market, and a slight rise in and the failed rally attempts that previously occurred. From a technical perspective,
business confidence and industrial the current rally has been marked by strong momentum and expanding volume
orders all suggest the possibility that on the upside, and diminishing momentum and volume on the downside. Additionally,
some areas of the global economy more cyclical areas of the market (such as the consumer discretionary and
may be starting to recover. On a technology sectors) have been outperforming, as have emerging markets when
compared to developed markets, trends that occur when recoveries begin.
geographic basis, the evidence for an
acceleration is strongest in China and Looking ahead, we expect volatility will persist, and it would not be surprising to
weakest in Japan, where the balance see additional selling squalls in the months ahead. Nevertheless, while markets
are certainly not out of the woods, we believe equities should continue to move
of data is still strongly negative.
higher over the course of the year.
However, it is important to emphasize
that there are still some clear negative Global Equity Returns as of March 2009
signs in the global economy, and the
10%
downside risks remain high. First, the
0
improvements in some economic
-10
series described above are miniscule -20
in comparison to the severe decline -30
of previous months. Second, there -40
-50 1 month 3 month 12 month
was a widespread increase in
Global Equities United States Japan Europe Emerging
inventory levels during the end of Markets
2008. Therefore, even if demand
Source: Bloomberg. Global Equities: MSCI World Index; US: S&P 500 Index; Japan: MSCI Japan Index; Europe: MSCI Europe Index; Emerging
stabilizes, output is likely to be more Markets: MSCI Emerging Markets Index. Past performance does not guarantee future results. It is not possible to invest directly in an index.
depressed until inventory levels
Bond Markets
have normalized. Additionally, and
US Treasury securities rallied following the announcement that the Federal Reserve
perhaps most importantly, the global
would be purchasing $1 trillion worth of Treasuries and mortgage securities and
financial system as a whole remains
the yield on the benchmark 10-year Treasury moved from over 3% to around 2.5%.
exceptionally fragile and could be It has subsequently moved to just under 3% as some economic data has shown
subject to additional shocks, although signs of improvement. Should economic news worsen and the Fed continue its
aggressive policies, yields might move to the low 2% range, likely marking the
bottom point. Likewise, it is hard to imagine yields moving much higher than the
low 3% range until clearer evidence of an economic recovery emerges.

3. In credit markets, the main themes have been weakness in the financial sector
policymakers around the world have
and a renewal of healthy levels of bond issuance. Credit spreads have recently
narrowed following the latest round of policy initiatives and the expansion of remained committed to aggressively
quantitative easing measures. High-yield markets in particular have responded combating credit deflation.
well to this environment and have enjoyed solid performance of late.
On balance, our view is still that the
Overall, we continue to advocate a focus on higher-quality investments. As an global economy is in the midst of a
alternative to US Treasuries, we prefer agency mortgages (Ginnie Mae in particular), severe and dangerous recession,
which offer attractive yields and represent a good investment opportunity. Select but, importantly, the massive policy
high-quality corporate bonds also look attractive to us.
initiatives around the world have
Finally, we continue to have a favorable view toward municipal bonds. Municipal begun to bear some fruit. The
yields are attractively valued when compared to taxable equivalents, and munis dramatic interest rate cuts, spending
are supported by a long history as a high-quality asset class with low relative
increases, tax cuts, capital injections,
volatility, consistency in performance and low default rates. As such, we believe
bank rescues and plethora of new
munis continue to represent a good long-term investment.
government programs have all helped
Global Fixed Income Returns as of March 2009 to combat ongoing credit-related
deflation risks. We believe the fourth
10%
quarter of 2008 and the first quarter
5
0 of 2009 will mark the low points for
-5
economic growth. Looking ahead,
-10
-15 1 month 3 month 12 month we expect a small gain in world
-20
economic growth by the third
United States Europe United Japan Investment High Yield Emerging
Kingdom Grade Markets quarter of this year. We also expect
to see positive levels of growth in
Source: Barclays Capital Indices. US: US Treasury component of the US Government Index; Europe: Treasury component within Pan-European
Aggregate Index; UK: Gilts component of the Sterling Aggregate Index; Japan: Japan Government Related component of the Asia Pac the United States at some point in
Aggregate Index; Investment Grade: Corporate component of the US Credit Index; High Yield: Barclays Capital High Yield Index; EM: Barclays the second half of 2009.
Capital Emerging Markets Index. Past performance does not guarantee future results. It is not possible to invest directly in an index.
Some signs of improved economic
Currency Markets data as well as signals that inflation
One of the major recent themes in currency markets has been a reversal of the
has been rising in some areas (most
strength in the US dollar that occurred through much of 2008. The dollar has been
notably in the United Kingdom) have
particularly weak against the euro and some emerging market currencies. The other
significant theme has been the continued weakness of the Japanese yen, which caused some to worry that inflation
has fallen in value as a result of the exceptional weakness in the Japanese economy. risks are resurfacing. While it is
normally the case that large budget
We expect the main driver of future currency valuation to be investor risk aversion:
The US dollar has been acting as a safe-haven currency, appreciating when risk deficits and the explosion in central
aversion is high, and decreasing when risk appetite improves. We expect these banks’ monetary bases are typically
trends to continue in the year ahead. associated with inflation, we do not
believe this will be the case in the
US Dollar Index (DXY) current environment. At present,
deflation still remains a more pressing
120
concern and we believe higher
100
inflation could come about only after
80 the economy begins to recover in
60 earnest, at which time central bankers
3/02 9/02 3/03 9/03 3/04 9/04 3/05 9/05 3/06 9/06 3/07 9/07 3/08 9/08 3/09 will need to reassess their positions.
Source: Bloomberg.

4. Commodities Markets
Oil prices remained stubbornly pegged at around the $40 a barrel mark early in
the year, although prices have begun to drift higher more recently as oil has shown
some response to the improvement in global economic momentum. We do expect
oil prices to continue to move higher over the course of the year.
The recent improvement in risk appetite has caused gold prices to slip somewhat
over the last several months. The future direction of gold prices will likely continue
to be tied into the fate of the US dollar. In general, we have a preference for gold
investments over oil given the lower sensitivity of gold to economic activity and
increased efforts to reflate the global economy.
Among other commodities, industrial metals have experienced a rebound, but
production has shown signs of slacking, presenting a risk for this commodity group.
Oil & Gold Prices as of March 2009
US$150 US$1,200
Oil (left side)
125 1,000
Gold (right side)
100 800
75 600
50 400
25 200
0 0
3/03 3/04 3/05 3/06 3/07 3/08 3/09
Source: Bloomberg. Oil prices reflect West Texas Intermediate Crude.
This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The
opinions expressed are as of April 2009, and may change as subsequent conditions vary. Individual portfolio managers for BlackRock may have opinions and/or make investment decisions that may, in certain respects,
not be consistent with the information contained in this report. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are
not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in
this material is at the sole discretion of the reader. Investment involves risks. International investing involves additional risks, including risks related to foreign currency, limited liquidity, less government regulation and
the possibility of substantial volatility due to adverse political, economic or other developments. These risks are often heightened for investments in emerging/developing markets or smaller capital markets. The two
main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that
the issuer of the bond will not be able to make principal and interest payments. There may be less information available on the financial condition of issuers of municipal securities than for public corporations. The
market for municipal bonds may be less liquid than for taxable bonds. A portion of the income may be taxable. Some investors may be subject to Alternative Minimum Tax (AMT). Capital gains distributions, if any, are
taxable. Investments in the natural resources industries can be significantly affected by events relating to those industries, such as variations in the commodities markets, weather, disease, embargoes, international,
political and economic developments, the success of exploration projects, tax and other government regulations, as well as other factors.
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AC2651-4/2009
GLBL-VIEWS-0309