• Lessons from Yellowstone. Though last month's Annual Economic Symposium in Jackson Hole focused on the theme of "Inflation Dynamics and Monetary Policy," for investors a more relevant topic might draw its inspiration a few miles north in Yellowstone and lessons from the 1988 fires. Years of fire suppression policies may have contributed to the size of the fires. Fear of financial market conditions tightening (fire) and the avoidance of any actions which might contribute to that occurrence appears prevalent in many Fed officials' viewpoints. Whether such policies ultimately contribute to even larger "fires" remains to be seen.
  • Expectations for the September FOMC. While U.S. economic data clearly have argued in our assessment for a long justified increase in the funds rate, any signs of disappointing U.S. data or financial market instability would likely postpone liftoff. Note that this would not mean until December, but rather would put October firmly in play as the Fed has been clear to indicate that a policy change can occur at any meeting and an unscheduled press conference could be used to help communicate the policy change.
  • The Accumulated Fuel in Emerging Markets. Global growth matters to the outlook. But the larger significance for investors lies in the financial linkages the potential for collapsing Chinese growth could reveal. As in all crises, such linkages are never so clear ahead of time and only reveal themselves, and the extent of their significance, afterwards. What is clear and has been clear for some time is the most obvious source of financial stress appears in the rise in private sector emerging markets credit.

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The sector performance and yields listed are represented by, respectively: Barclays US High Yield Index, S&P Leveraged Loan Index, Barclays US Securitized Ex-MBS Index, Barclays US Mortgage Backed Securities Index, Barclays US Corporate Investment Grade Index, Barclays Global Aggregate ex-USD Index, JP Morgan EMBI Global Diversified Index, Barclays US Inflation Protected Securities Index and Barclays US Treasury Index. The reference indices are represented by the Barclays US Aggregate and the Barclays Municipal Bond Index.

Investing involves risk, including possible loss of principal.

Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments.

Non-investment-grade debt securities (high-yield/junk bonds) may be subject to greater market fluctuations, risk of default or loss of income and principal than higher-rated securities.

International investing involves 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 often are heightened for investments in emerging/ developing markets, in concentrations of single countries or smaller capital markets.

Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

The opinions expressed are those of BlackRock as of Sept. 8, 2015, and may change as subsequent conditions vary. Information and opinions are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable. The information contained in this report is not necessarily all-inclusive and is not guaranteed as to accuracy. Past performance does not guarantee future results. There is no guarantee that any forecasts made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Investment involves risk. Reliance upon information in this report is at the sole discretion of the reader.

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