Investment Directions Market Outlook

Central Bank Divergence

As the Federal Reserve (Fed) ends monetary easing and is set to raise rates sometime in mid-2015, the European Central Bank (ECB) and Bank of Japan (BoJ) are moving toward more easing. Short-term bonds should feel the impact of rate increases more than long-term bonds, as lower rates in Europe and Japan increase demand for long-term U.S. bonds with relatively more attractive yields. That, as well as several secular trends, will likely keep long-term U.S. bond yields low relative to history.

Expect a Stronger Dollar

Divergent central bank policies support a stronger dollar, with a number of implications, including lower oil prices, which benefits oil-importing countries like China, India and Japan.

U.S. Economy Leads the Pack

We believe the U.S. economy will show gross domestic product (GDP) growth in the area of 2.5% to 3% in 2015. While the U.S. economy is not without its challenges (labor participation is still low), it is in a better position than other developed markets. Perhaps the biggest challenge facing the U.S. economy is weaker growth overseas.

Be Prepared for Higher Volatility

Volatility, as measured by the VIX Index, is still well below its historical average, as was the case for most of 2014 (with a few notable exceptions, such as autumn). With the Fed ready to change tack, the economy struggling in Europe and geopolitical tensions in places like Ukraine, we expect higher volatility in 2015.

The Bottom Line

We continue to prefer stocks over bonds and cash, even with volatility expected to rise. We would focus on opportunities in certain international markets and cyclical sectors. Japan remains the most attractively priced developed market, with catalysts for further stock gains on the horizon.

Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses which may be obtained visiting the iShares ETF and BlackRock Mutual Fund prospectus pages. Read the prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

The BlackRock funds are actively managed and their characteristics will vary.

Investing in long/short strategies presents the opportunity for significant losses, including the loss of your total investment. Such strategies have the potential for heightened volatility and in general, are not suitable for all investors.

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. Frontier markets involve heightened risks related to the same factors and may be subject to a greater risk of loss than investments in more developed and emerging markets.

Frontier markets involve heightened risks related to the same factors and may be subject to a greater risk of loss than investments in developed and emerging markets.

There is no guarantee that dividends will be paid.

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.

There may be less information on the financial condition of municipal issuers than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. Some investors may be subject to federal or state income taxes or the Alternative Minimum Tax (AMT). Capital gains distributions, if any, are taxable.

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.

An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency and its return and yield will fluctuate with market conditions.

The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Cohen & Steers Capital Management, Inc., European Public Real Estate Association (“EPRA® ”), FTSE International Limited (“FTSE”), India Index Services & Products Limited, JPMorgan Chase & Co., MSCI Inc., Markit Indices Limited, Morningstar, Inc., The NASDAQ OMX Group, Inc., National Association of Real Estate Investment Trusts (“NAREIT”), New York Stock Exchange, Inc., Russell Investment Group or S&P Dow Jones Indices LLC, nor are they sponsored, endorsed or issued by Barclays Capital Inc. None of these companies make any representation regarding the advisability of investing in the Funds.  BlackRock is not affiliated with the companies listed above. Index data related to the underlying indexes is provided by the respective companies above.

Neither FTSE nor NAREIT makes any warranty regarding the FTSE NAREIT Real Estate 50 Index, FTSE NAREIT Residential Plus Capped Index, FTSE NAREIT Industrial/Office Capped Index or FTSE NAREIT All Mortgage Capped Index; all rights vest in NAREIT. Neither FTSE nor NAREIT makes any warranty regarding the FTSE EPRA/NAREIT Developed Real Estate ex-US Index, FTSE EPRA/NAREIT Developed Europe Index or FTSE EPRA/NAREIT Developed Asia Index; all rights vest in FTSE, NAREIT and EPRA. "FTSE®" is a trademark jointly owned by the London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under license.

The iShares® Funds and BlackRock® mutual funds that are registered with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940 ("Funds") are distributed in the U.S. by BlackRock Investments, LLC (together with its affiliates, "BlackRock").

This material is solely for educational purposes and does not constitute an offer or solicitation to sell or a solicitation of an offer to buy any shares of any fund (nor shall any such shares be offered or sold to any person) in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities law of that jurisdiction.

In Latin America, for Institutional and Professional Investors Only (not for public distribution). This material is solely for educational purposes only and does not constitute an offer or a solicitation to sell or a solicitation of an offer to buy any shares of any fund (nor shall any such shares be offered or sold to any person) in any jurisdiction within Latin America in which an offer, solicitation, purchase or sale would be unlawful under the securities law of that jurisdiction. If any funds are mentioned or inferred to in this material, it is possible that some or all of the funds have not been registered with the securities regulator of Brazil, Chile, Colombia, Mexico, Peru, Uruguay or any other securities regulator in any Latin American country, and thus, might not be publicly offered within any such country. The securities regulators of such countries have not confirmed the accuracy of any information contained herein. No information discussed herein can be provided to the general public in Latin America.

In Singapore, this is issued by BlackRock (Singapore) Limited (Co. registration no. 200010143N). In Hong Kong, this document is issued by BlackRock Asset Management North Asia Limited 貝萊德資產管理北亞有限公司 and has not been reviewed by the Securities and Futures Commission of Hong Kong. Not approved for distribution in Taiwan or Japan. In Canada, this material is intended for permitted clients only. In Latin America this piece is intended for use with Institutional and Professional Investors only. This material is solely for educational purposes and does not constitute investment advice, or an offer or a solicitation to sell or a solicitation of an offer to buy any shares of any funds (nor shall any such shares be offered or sold to any person) in any jurisdiction within Latin America in which such an offer, solicitation, purchase or sale would be unlawful under the securities laws of that jurisdiction. If any funds are mentioned or inferred to in this material, it is possible that some or all of the funds have not been registered with the securities regulator of Brazil, Chile, Colombia, Mexico, Peru or any other securities regulator in any Latin American country, and thus, might not be publicly offered within any such country. The securities regulators of such countries have not confirmed the accuracy of any information contained herein.

Issued in Australia by BlackRock Investment Management (Australia) Limited ABN 13 006 165 975 AFSL 230 523 (BIMAL). Any general information contained in this document is provided in Australia by BIMAL. Any distribution, by whatever means, of this document to persons other than the intended recipient is unauthorised. This document is intended only for wholesale clients and this document must not be relied or acted upon by retail clients (as those terms are defined in the Australian Corporations Act). This document is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. This document contains general information only and is not personal advice. BIMAL is the issuer of financial products and acts as an investment manager in Australia. BIMAL is a part of the global BlackRock Group which comprises financial product issuers and investment managers around the world. This document has not been prepared specifically for Australian investors. It may contain references to dollar amounts which are not Australian dollars. It may contain financial information which is not prepared in accordance with Australian law or practices.

Notice to investors in New Zealand:
(For wholesale clients only - not for public distribution.)
This material is being distributed in New Zealand by BlackRock Investment Management (Australia) Limited ABN 13 006 165 975, AFSL 230523 ("BlackRock"). In New Zealand, this information is provided for registered financial service providers and other wholesale clients only in that capacity, and is not provided for New Zealand retail clients as defined under the Financial Advisers Act 2008. BlackRock does not offer interests in iShares to the public in New Zealand, and this material does not constitute or relate to such an offer. Before investing in an iShares exchange traded fund, you should carefully consider whether such products are appropriate for you, read the applicable prospectus or product disclosure statement available at iShares.com.au and consult an investment adviser. Past performance is not a reliable indicator of future performance. Investing involves risk including loss of principal. No guarantee as to the capital value of investments nor future returns is made by BlackRock or any company in the BlackRock group. Recipients of this document must not distribute copies of the document to third parties. This information is indicative, subject to change, and has been prepared for informational or educational purposes only. No warranty of accuracy or reliability is given and no responsibility arising in any way for errors or omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock. No representation or guarantee whatsoever, express or implied, is made to any person regarding this information. This information is general in nature and has been prepared without taking into account any individual's objectives, financial situation, or needs. You should seek independent professional legal, financial, taxation, and/or other professional advice before making an investment decision regarding the iShares funds. An iShares fund is not sponsored, endorsed, issued, sold or promoted by the provider of the index which a particular iShares fund seeks to track. No index provider makes any representation regarding the advisability of investing in the iShares funds.

©2014 BlackRock, Inc. All rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, BUILD ON BLACKROCK, ALADDIN, iSHARES, iBONDS, iTHINKING, iSHARES CONNECT, LIFEPATH, SO WHAT DO I DO WITH MY MONEY, INVESTING FOR A NEW WORLD, BUILT FOR THESE TIMES, CoRI and the CoRI logo are registered and unregistered trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners.

Not FDIC Insured | May Lose Value | No Bank Guarantee

2648A-AC-1214 / USR-5064