The document provides a mid-year update on the 2014 outlook for various asset classes and investment themes. It notes that stocks have outperformed bonds so far in 2014 and are on pace for mid to upper single digit returns by year-end. It maintains the views that economic growth will continue improving but remain below trend, and that interest rates will trend upward modestly in the second half of the year. Key investment themes to seek growth while managing volatility, find income but don't overreach, and rethink bonds also remain intact.
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
U.S. equities continued their impressive advance, with
no significant declines during the quarter. In Europe, policy changes may function as an important tailwind for growth and market performance. Globally, M&A activity has been on the rise, giving a boost to equity prices across the market-cap spectrum. The current bull market has been significant — in terms of both length and magnitude.
Whats Ahead In 2012 - An Investment Perspective (Spring Update)scottmeek
Bob Doll, Chief Equity Strategist for Fundamental Equities with BlackRock, updates his economic and market outlook, comments on his 10 predictions for the year and discusses investment opportunities for the current environment.
The global economy is improving overall, with the U.S. and U.K. leading the way. We expect higher GDP growth from the U.S. to support risk assets in the third quarter. We continue to expect a rise in U.S. interest rates in 2014, though eurozone policy may help slow a near-term increase. We favor credit, prepayment, and liquidity risks, which we express in allocations to mezzanine CMBS, peripheral European sovereigns, select EM sovereigns, and interest-only (IO) CMOs.
No bubble trouble; stocks are still reasonably priced. This credit cycle has unique characteristics that continue to make high-yield bonds attractive. Interest-rate volatility poses greater risk than higher rates themselves.
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
Signs of inflation will raise the stakes for the Fed’s policy communications. Favorable conditions for leveraged strategies could reverse quickly. Reasonable valuations and the Fed’s policy goals continue to support risk assets.
As Fed tapering unfolds, we expect to see stronger growth from developed markets, while emerging markets in aggregate may experience further currency and capital market weakness. In the United States, declining labor participation continues to drive falling unemployment figures, and may harbor the beginning of a wage inflation surprise.
• We expect credit, liquidity, and prepayment risks will continue to
be rewarded by the market in the months ahead, while interestrate
risk remains unattractive due to its asymmetric risk profile.
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
Market Outlooks
We leverage a global network of investment consultants and researchers to deliver industry specific knowledge and dynamic tools, which allows our clients to make informed strategic investment decisions.
U.S. equities continued their impressive advance, with
no significant declines during the quarter. In Europe, policy changes may function as an important tailwind for growth and market performance. Globally, M&A activity has been on the rise, giving a boost to equity prices across the market-cap spectrum. The current bull market has been significant — in terms of both length and magnitude.
Whats Ahead In 2012 - An Investment Perspective (Spring Update)scottmeek
Bob Doll, Chief Equity Strategist for Fundamental Equities with BlackRock, updates his economic and market outlook, comments on his 10 predictions for the year and discusses investment opportunities for the current environment.
The global economy is improving overall, with the U.S. and U.K. leading the way. We expect higher GDP growth from the U.S. to support risk assets in the third quarter. We continue to expect a rise in U.S. interest rates in 2014, though eurozone policy may help slow a near-term increase. We favor credit, prepayment, and liquidity risks, which we express in allocations to mezzanine CMBS, peripheral European sovereigns, select EM sovereigns, and interest-only (IO) CMOs.
No bubble trouble; stocks are still reasonably priced. This credit cycle has unique characteristics that continue to make high-yield bonds attractive. Interest-rate volatility poses greater risk than higher rates themselves.
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
Signs of inflation will raise the stakes for the Fed’s policy communications. Favorable conditions for leveraged strategies could reverse quickly. Reasonable valuations and the Fed’s policy goals continue to support risk assets.
As Fed tapering unfolds, we expect to see stronger growth from developed markets, while emerging markets in aggregate may experience further currency and capital market weakness. In the United States, declining labor participation continues to drive falling unemployment figures, and may harbor the beginning of a wage inflation surprise.
• We expect credit, liquidity, and prepayment risks will continue to
be rewarded by the market in the months ahead, while interestrate
risk remains unattractive due to its asymmetric risk profile.
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
Market Outlooks
We leverage a global network of investment consultants and researchers to deliver industry specific knowledge and dynamic tools, which allows our clients to make informed strategic investment decisions.
If U.S. politics do not derail the recovery, pent-up demand can drive faster economic growth. Fixed-income outflows appear likely to continue, pushing rates higher.
Perspectives & Planning - Washington Trust Wealth ManagementTony Nunes
Here is the first edition of Perspectives & Planning, a quarterly newsletter written by Washington Trust Wealth Management experts, featuring an outlook on the current state of the economy and the financial markets, as well as insights on financial planning.
Perspectives & Planning - Washington Trust Wealth Managementwash_trust
Here is the first edition of Perspectives & Planning, a quarterly newsletter written by Washington Trust Wealth Management experts, featuring an outlook on the current state of the economy and the financial markets, as well as insights on financial planning.
LBS Asset Allocation August Update - July 28, 2017Mark MacIsaac
Global economic data continue to point to robust and synchronized economic growth with the release of stronger-than-expected ISM surveys, German IFO business climate survey and Chinese Q2 real GDP growth data.
Arbuthnot Latham: Global Markets Report Q1 2019Siôn Puckle
Our report discusses general developments within global markets over the first quarter of 2019, with a focus on the issues influencing portfolios. Following an economic and market summary, we expand upon a number of themes before concluding with a review of the major asset classes.
Similar to BlackRock: 2014 Outlook The List - What to Know, What to Do (20)
This Georgetown Univ. report suggests that the U.S. will require 20 million more college-educated workers by 2025. I did an article comparing college grads employment situation in the U.S and China entitled "College Graduates: Too Many in China, Not Enough in America?" at my blog econmatters.com.
IEA says oil transit through the Suez Canal do not face much risk despite the ongoing political crisis in Egypt. This is the fact sheet from the IEA supporting this assessment.
G20 & The U.S. Dollar Policy - A PresentationEcon Matters
The Group of 20 ended on Nov. 12, 2010 in South Korea culminated in a watered down statement without any meaningful agreement on rising global tensions over trade and currency issues.
This presentation outlines some of my observations regarding G20, U.S. dollar policy and investing strategy in this environment
The Gulf oil spill and drilling moratorium has forced a shift within the energy industry from offshore to onshore. This presentation discusses this trend and profile the prolific Bakken play in the U.S. and some observations of the markets and the oil services sector.
Unveiling the Secrets How Does Generative AI Work.pdfSam H
At its core, generative artificial intelligence relies on the concept of generative models, which serve as engines that churn out entirely new data resembling their training data. It is like a sculptor who has studied so many forms found in nature and then uses this knowledge to create sculptures from his imagination that have never been seen before anywhere else. If taken to cyberspace, gans work almost the same way.
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
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3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
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Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
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Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
Explore our most comprehensive guide on lookback analysis at SafePaaS, covering access governance and how it can transform modern ERP audits. Browse now!
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2. [ 2 ] 2 0 1 4 O utlook : T he L ist — M I D - Y E A R u p date
On Track, But Eyes Open
for Speed Bumps
Asset Class
YTD 2014
Returns Outlook
U.S. Stocks 5.88%
International
Stocks
4.56%
Emerging
MarketsStocks
5.81%
Bonds 3.24%
Stocks ON A DECENT PACE
Source: Morningstar. As of June 15, 2014. U.S.
Stocks are represented by the S&P 500 Index,
International Stocks by the MSCI EAFE Index,
Emerging Markets Stocks by the MSCI Emerging
Markets Index, and Bonds by the Barclays
Capital U.S. Aggregate Index. Past performance
does not guarantee future results. You cannot
invest directly in an index.
Investment Actions for 2014
Rethink Your
Bonds
Seek Growth,
Manage Volatility
Generate Income,
But Don’t Overreach
The first half of the year was filled with surprises that few could have
foreseen—and yet markets seemed not to notice, carrying on with
gusto. While we don’t believe we are entering a calm-before-the-
storm environment, there are certainly factors that argue against
complacency in the second half.
First, about those surprises: Severe winter weather disrupted the U.S.
economy enough to help trigger an unexpected slowdown; geopolitical
tensions dominated headlines; and, of course, the drop in interest rates
in the first half seemed against all odds.
The market upshot: Stocks have outperformed bonds so far, and are on a
pace that suggests returns could end the year in the mid to upper single
digits. Not a great year, in other words, but a decent one. Despite the rally in
bonds and corresponding sharp drop in interest rates, we maintain our early-
year outlook: We still expect rates to trend up, if only modestly. Our core view
of the economy also stands: improving, but still below-trend growth. And one
development we’re watching closely: tentative signs of a pickup in U.S. inflation.
Likewise, our core themes for the year remain firmly intact: Seek growth
while managing volatility, find income but don’t overreach, and rethink your
bonds. That means we would stick with stocks (particularly international
equities), choose bonds wisely, and consider supplementing traditional
stocks and bonds with high-potential alternative strategies.
We hope the guidance in these themes helps you better position to pursue
your life goals—saving for education, building a nest egg for retirement,
or securing an income stream for your golden years. We understand that
achieving these ambitions may seem harder than ever. How do you generate
enough income when yields remain so low? How do you invest for future
growth when the markets are offering few bargains?
That’s where The List comes in. We offer up the essential things you need to
know about the markets—along with our recommendations for navigating
them. In short, The List is designed to help you make sense of the markets
and the opportunities they hold—so that you can prepare today to reach
tomorrow’s goals.
3. W hat to know , what to do [ 3 ]
the BLACKROCK list
What to Know—and Do—in 2014
WhattoDOWhattoKnow
The Stock Market Is Still the Best Place to Be
Look Outside U.S. Borders
Choose Your Bonds Wisely
Keep Munis in Mind
Go Beyond Traditional Stocks and Bonds
The Economy: Back on Track, But Moving Slow
Inflation: On the Way Up?
Jobs Picture: Brighter, But Wage Growth a Wildcard
Interest Rates: Still Low, But Trending Up
Disconnect: Geopolitical Risk Up, Volatility Down
4. Key TakeawayWhat to Know
1
[ 4 ] 2 0 1 4 O utlook : T he L ist — M I D - Y E A R u p date
As the year started, the U.S. economy finally seemed to be
getting its head above water. Then it was pulled under when one of
the most brutal winters in decades led to a chilling slowdown—the economy
actually contracted in the first quarter. But the “weather effect” dissipated,
business activity resumed and we seem to be getting back on track.
Granted, the economy faces a number of headwinds, such as lackluster
wage growth and weak consumption. But we still expect U.S. gross domestic
product (GDP) growth in the area of 3% in the second half. Not bad, though
still below the post-WWII average of 3.5%.
A strengthening economy leads to a proverbial “good news/bad news” dilemma.
The good news is that improved economic activity should support company
earnings growth in the second half of the year. The downside is that the Federal
Reserve (Fed) will take note and could hike interest rates earlier than some
expect. At the very least, this would have negative implications for bonds.
Overall, however, we believe the current pace of economic growth should
lend modest support to stocks through the end of the year.
The Economy: Back on
Track, But Moving Slow
Economic growth of
3%, while below the
long-term average, is still
supportive of stocks.
The economy has risen from the winter
doldrums, and growth should be enough to
be modestly favorable for stocks in the
second half.
wea
t
he r w ei g h t li
f
ted
5. Key Takeaway What to Know
2
W hat to know , what to do [ 5 ]
Interest Rates: Still Low,
But Trending Up
Question for your
portfolio: Are you
prepared for rising
rates?
This is still a difficult environment for bonds.
Don’t expect a sharp rise in rates, but even a
small increase could impact the value
of the bonds in your portfolio.
In one of the year’s biggest surprises, interest rates fell rather
than rose as most (ourselves included) had anticipated.While it
might appear that weaker economic data was to blame, on closer look, yields
did most of their decline in January—a month when stock market weakness
raised the appeal of bonds. At the same time, U.S. bonds grew more attractive
as global central bank policy accommodation drove international bond yields
lower. Taken together, these factors accounted for much of the surprising
move lower in rates in the first half of the year.
Looking ahead, we don’t expect this trend to continue. With the economy
rebounding, and the Fed still unwinding its bond purchase program, interest
rates should begin to inch up again. More precisely, we believe the 10-year
Treasury could rise about 50 basis points (or half of one percent) over the
second half of the year.
While we don’t expect interest rates to rise sharply this year, even a minor
increase can cause the value of your bond portfolio to go down. On a brighter
note, we still believe the Fed is likely to keep short-term interest rates low
through early 2015.
RISI
N
G
In t e r e s t R
a
tes
6. 3
Key TakeawayWhat to Know
[ 6 ] 2 0 1 4 O utlook : T he L ist — M I D - Y E A R u p date
Inflation: On the Way Up?
Inflation is still low historically, but looks
poised to inch up.
Higher inflation calls
for growth-oriented
investments.
We are beginning to see signs that inflation finally may be
starting to creep up in the United States. For example, producer
inflation (a measure of wholesale prices for goods and equipment) rose in
May by the biggest margin since September 2012. Other measures point to a
similar conclusion—that inflation has at the very least bottomed and may be
poised to increase.
When buying groceries or gas, it may feel that inflation is even worse, but it is
important to put the recent numbers in perspective. Inflation is low by historic
standards and an increase of, say, one percentage point still keeps it at modest
levels. A number of factors, including weak wage growth, are keeping inflation
muted, and we don’t expect that to change significantly in the next few months.
As such, inflation is likely to increase only moderately through the end of the
year. At the very least, concerns about deflation in the U.S. are gone.
That said, inflation erodes the value of your investments, and with bond yields
still quite low, investors need to ensure some level of inflation protection is built
into their portfolios. This again argues for a preference for stocks and other
growth-oriented investments.
IN
F
L
ATIO N TI C KIN G
U
P?
7. 4
Key Takeaway What to Know
W hat to know , what to do [ 7 ]
The first half of the year brought a number of significant
geopolitical tensions. And, for the most part, investors have shrugged
them off. Stocks continued to advance and reach new highs, while volatility fell
to a level 40% below historic norms—all during a period that included the
conflict in Ukraine, a military coup in Thailand, and most recently, turmoil in Iraq.
The situation in Iraq has the potential to stoke volatility: Should it cause a spike in
oil prices, that would be a real headwind for the global economy. Outside of that,
the apparent disconnect between front-page news and Wall Street may not be
irrational, at least in the near term. There’s no clear link between these events
and near-term economic or earnings growth and, for the most part, they have
little significance for the global economy. Furthermore, investors have been
comforted in recent years by the warm blanket of central bank accommodation,
conditioning them to “buy the dip.” The long-term impact may be a different story,
as wars, military coups and sanctions are rarely good for global economic growth.
All of that said, low volatility can present a risk in that the market may be
vulnerable to a slide should there be any outside shocks. If events in Iraq
or elsewhere lead to an economically significant event, like an oil spike,
financial markets are likely to react.
Disconnect: Geopolitical
Risk Up, Volatility Down
The stock market has been relatively stable, but the next
geopolitical shock could well cause a selloff. As always,
diversification is the best advice.
Question for your
portfolio: Are you
prepared to endure
a volatility spike?
TENSIO
N
S
U P, V O L aTILIT
Y
DOWN
8. 5
Key TakeawayWhat to Know
[ 8 ] 2 0 1 4 O utlook : T he L ist — M I D - Y E A R u p date
Amid new signs of economic strength remains one
stubborn area of weakness: the labor market. Jobs and wages
are improving, but they still represent a mixed bag. On the one hand, the
unemployment rate is down. On the other, the labor participation rate is still
low and wage growth, while showing early signs of a pickup, is largely elusive.
The labor market is important to the economy, and something we watch
closely. Slow wage growth translates into soft consumer spending, which,
in turn, hampers economic growth. Household spending is a vital engine for
the economy, and if it remains sluggish, we may well see slower economic
growth for a longer period, which could particularly affect the companies
most dependent on consumer spending. It could also contribute to lower
stock market returns over the longer term.
While we believe the number of jobs will continue to grow, and the
unemployment rate fall, the outlook for wage growth is more of a wildcard.
Jobs Picture: Brighter, But
Wage Growth a Wildcard
Weak wage growth
means people have less
to spend. And that’s an
economic headwind.
Americans are not getting raises or spending money
like they used to. That could help keep
economic growth in low gear for some
time, making sectors of the market like consumer
discretionary companies less attractive.
PR
E
S S U R e O N W AG
E
S
9. 6
Key Takeaway What to DO
W hat to know , what to do [ 9 ]
The Stock Market Is Still
the Best Place to Be
Stocks are no longer
cheap, but opportunities
exist. Selectivity is key.
We would still
favor equities.
Stocks are no longer a bargain, but still look attractive
versus bonds and cash.
YO U R P O R T F O LIO
Let’s be clear: Stocks are not cheap. On a global basis, stocks
have gained more than 40% from the summer of 2012 and 150% from the
2009 lows. Even emerging markets, laggards for most of the past three
years, have more than doubled since early 2009. Most traditional measures
of value show stocks to be sporting fairly lofty price tags. Not surprisingly,
many commentators are claiming stocks are in a bubble.
We are not among them. Putting the current environment in perspective, it
is clear that stocks are still more attractive than cash and bonds. Their value
is perhaps best characterized as not cheap, but not unreasonable. As the
economy improves, we believe stocks still have room to grow.
Bottom line: The stock market can still move higher this year, and we continue
to favor investing in stocks over bonds, but we would be cautious. In a world of
few bargains, investors need to tread carefully and look for relative value. We
would focus on those areas of the market that offer good value and downside
protection. That means favoring large- and mega-cap stocks, as well as
cyclical sectors like energy and international strategies. We would avoid, or
trim positions in, small caps, retailers and the consumer discretionary sector.
10. 7
Key TakeawayWhat to DO
[ 1 0 ] 2 0 1 4 O utlook : T he L ist — M I D - Y E A R u p date
YO U R P O R T F O LIO
Look Outside U.S. Borders
Question for your
portfolio: Are you taking
advantage of all the
world markets have
to offer?
International dividend-paying
stocks are an attractive way to
get exposure outside the U.S. and
gain some incremental yield.
Check your portfolio to ensure you have sufficient
exposure to international stocks.
Em
e
r
g i n g M a r
k
e
ts
Dev
e
l o p e d M a r
k
ets
In addition to developed
markets, don’t ignore
emerging markets.
In
t
e
r
n atio n a l st o
c
ks
Broadly speaking, U.S. investors tend to prefer the
comfort of home and are biased toward U.S. stocks over
the international alternatives. We believe investors should rethink
this. Increasing international exposure makes sense in general, but even
more so these days when most of the stock market bargains are found
overseas. U.S. stocks are no longer cheap, and that has stocks outside
U.S. borders looking even more reasonable.
Specifically, we would encourage investors to take a look at international
developed equities, particularly those in Europe and Japan. We are also
becoming more positive toward select emerging markets. In Europe,
recent market-friendly actions by the European Central Bank could support
stocks over the next few months. Meanwhile, Japan is by far the cheapest
developed market today, and monetary accommodation there is expected
to last a couple years beyond the U.S. cycle.
11. 8
Key Takeaway What to DO
W hat to know , what to do [ 1 1 ]
Choose Your Bonds Wisely
Seek managers with flexibility
and security selection expertise.
Flexibility is key to
navigating today’s
bond markets.
With rising interest rates, bond portfolio principal is at risk.
Be wary of shorter-maturity bonds in particular.
B
u y e r s B e w a r
e
BONDS
There are still very few bargains out there for people
buying bonds.This is particularly true after bonds’ surprising rally in the first
half, a consequence of the early-year “flight to safety,” the perception of relative
value given lower yields overseas, a supply/demand imbalance and, to some
extent, the weather-related economic slowdown. All of these dynamics are
unlikely to persist in the second half. In fact, we expect investors to trim positions
in bonds and rates to rise (though we don’t anticipate a big bond selloff).
All told, navigating the bond market remains very difficult, but bonds are an
important source of income and play a vital role in a portfolio. Our advice:
Choose wisely. Some areas of the bond market are more vulnerable to
rising rates than others. Shorter-maturity bonds, which are used as cash
alternatives by many investors, could face greater upward movement in
yields and resulting principal losses. This may surprise some investors,
making that an area to approach with caution.
With yields likely to be volatile, and some areas of the bond market feeling the
effects more so than others, a flexible, go-anywhere bond portfolio that can
make adjustments on the fly is an invaluable addition to your fixed income toolkit.
12. 9
Key TakeawayWhat to DO
[ 1 2 ] 2 0 1 4 O utlook : T he L ist — M I D - Y E A R u p date
H
IG H E R TA X ES
Keep Munis in Mind
Munis are still an attractive asset class—especially at a time when many people
are paying higher taxes. The key for investors is to be selective.
Question for your
portfolio: Are higher
taxes eating away
at the value of your
investments?
Munis maintain their appeal. With their tax-exempt status,
municipal bonds are one of the best ways to keep more of what you earn.
A D D M U NIS
At
t r a c ti v e In c o
m
e
Municipal bonds saw a significant rally in the first half of
the year, benefiting from some of the same trends that boosted bonds
overall, but particularly from a glut of demand amid limited supply. Similar
returns are unlikely in the second half of the year. But given their tax-exempt
status, and improving credit conditions among state and local issuers, munis
still offer some relative value.
Overall, municipal bonds may not be cheap per se, but they continue to look
attractive versus both Treasuries and corporate bonds. We’re seeing competitive
yields on a before-tax basis—which only increases the after-tax value.
Tax season, and a realization of the impact of 2013’s higher tax rates, also
heightened the appeal of the asset class.
Some measure of caution, and proper expectations, are warranted going
forward. Following a strong 2014 start, we would emphasize careful security
selection and nimble sector rotation to preserve the early-year gains. This does
not take away from munis’ appeal as an attractive source of tax-advantaged
income, but it does suggest that a diversified and unconstrained approach
is a smart call in the tax-exempt space as well.
13. 10
Key Takeaway What to DO
W hat to know , what to do [ 1 3 ]
Go Beyond Traditional
Stocks and Bonds
The traditional asset classes are not without their challenges
today. Stocks are no longer cheap, neither bonds nor cash offer compelling
value, and all could be vulnerable to increases in interest rates. By incorporating
non-traditional, or alternative, strategies into your investing arsenal, you
can potentially enhance diversification and amplify your portfolio’s growth
potential. Diversification doesn’t guarantee profits or prevent loss (nothing
does), but it does allow you to spread your risk across a broader set of
instruments that may respond differently to a given set of market conditions.
In short, alternative asset classes and strategies provide patterns and sources
of risk and return that are different from those offered by traditional assets. For
example, real estate (a popular alternative asset) does not trade exactly like
stocks and bonds. And a long/short approach (a popular alternative strategy)
is used by flexible managers in an effort to profit from up, down and sideways
markets. Long/short strategies can pose the risk of losses larger than the
invested capital, but within a well-rounded portfolio, we believe they can offer
a differentiated source of return and the potential for more consistent results
over time. Ultimately, the goal in adding alternatives to your portfolio is to
enhance diversification, seek out returns and smooth out volatility over time.
Alternatives can equip
your portfolio with
differentiated sources
of risk and return.
Consider long/short strategies, real estate
and flexible investments.
Use non-traditional tools to diversify and smooth the ride.
SEEK A
SMOOTHER
RIDE
Br
o
a d e n & Di ve rs
ify
40%
60%
TRADITIO
N
A L S T O C K S
A
N
D
BONDS
14. [ 1 4 ] 2 0 1 4 O utlook : T he L ist — M I D - Y E A R u p date
1 2 3
Seek Growth,
Manage Volatility
} Allocate to adaptable
strategies
} Seek returns beyond
traditional U.S. bonds
} Reduce your interest
rate sensitivity
} Take a flexible approach
to income
} Consider credit for yield
} Adapt to higher taxes
} Diversify into
unconstrained and
alternative strategies
} Allocate to higher
growth opportunities
} Manage volatility with
conservative equities
While 2014 has been kind to markets so far, uncertainties linger and sources
of income and return are not necessarily easy to identify. The mid-year point is
a good time to review your portfolio and work with your financial professional
to make adjustments aimed at taking advantage of emerging opportunities.
Turning Insight Into
Investment Actions
Rethink Your
Bonds
Generate Income,
But Don’t Overreach
Investment actions for 2014
RELATED RESOURCES
Life After Zero: 2014 Mid-Year Investment Outlook
The latest publication from the BlackRock Investment Institute
takes an in-depth look at the global trends that may drive
financial markets in the second half.
BlackRock Investment Directions
BlackRock’s monthly asset allocation recommendations,
with ideas for positioning your portfolio in the months ahead.
15. W hat to know , what to do [ 1 5 ]
Russ Koesterich
Global Chief Investment
Strategist
Jeffrey Rosenberg
Chief Investment Strategist
for Fixed Income
Peter Hayes
Head of BlackRock’s
Municipal Bonds Group
About the authors
Russ Koesterich, Jeffrey Rosenberg and Peter Hayes are prolific commentators on
the markets, can regularly be seen on CNBC, Fox Business News and Bloomberg
TV, and are often quoted in the print media, including The Wall Street Journal,
USA Today and Barron’s.