Investment Directions

Market Outlook

Volatility Is Back
After months of relatively calm markets, volatility has returned. In recent weeks, market volatility has pushed up against four-month highs as investors have contended with a growing list of geopolitical risks, including escalating tensions in Gaza, Iraq and Ukraine.

But Stocks Can Push Ahead
While we expect the rocky road to continue for the foreseeable future and stocks are close to fully valued, we still see U.S. and global equities finishing the year modestly higher, barring an unexpected exogenous shock. Low inflation, continued easy monetary policy from the Federal Reserve (Fed) and an improving U.S. economy should help support further stock gains. Plus, stocks remain more attractively priced than the alternatives, namely bonds and cash.

We Like Market Segments Offering Relative Value
Though we still like stocks over bonds, we prefer market segments that offer relative value and potential downside protection. In fact, relative value—not just risk aversion—seems to be a major driver of market performance lately. We see this focus on value continuing.

Reasonable Is the New Cheap
At a time when most major asset classes look expensive, investors should focus on those that are more reasonably priced. In particular, we see value in select international markets, particularly Japan and emerging Asia; international and global dividend funds; large- and mega-cap companies; and certain cyclical sectors. In addition, within fixed income, we favor longer-dated munis and mortgages over expensive, rate-sensitive fixed income sectors, and we would be particularly cautious on two- to five-year Treasuries.

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. There is no guarantee that any fund will pay dividends.

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. Noninvestment-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(s) 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 Markit Indices Limited, MSCI Inc., or S&P Dow Jones Indices LLC. 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.

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)

It is possible that some or all of the funds mentioned or inferred to in this material 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 Hong Kong, this information is issued by BlackRock Asset Management North Asia Limited. This material is for distribution to "Professional Investors" (as defined in the Securities and Futures Ordinance (Cap.571 of the laws of Hong Kong)) and should not be relied upon by any other persons. In Singapore, this document is issued by BlackRock (Singapore) Limited (company registration number: 200010143N) for institutional investors only. For distribution in Korea and Taiwan for Institutional Investors only (or "professional clients," as such term may apply in local jurisdictions). This document is for distribution to professional and institutional investors only and should not be relied upon by any other persons. This document is provided for informational purposes only and does not constitute a solicitation of any securities or BlackRock funds in any jurisdiction in which such solicitation is unlawful or to any person to whom it is unlawful. Moreover, it neither constitutes an offer to enter into an investment agreement with the recipient of this document nor an invitation to respond to it by making an offer to enter into an investment agreement. Past performance is not a guide to future performance. There are risks associated with investing, including loss of principal. Changes in the rates of exchange between currencies may cause the value of investments to fluctuate. This document is for informational purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock fund and has not been prepared in connection with any such offer. Any research in this document has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy. This document contains general information only and does not take into account an individual's circumstances and consideration should be given to talking to a financial or other professional adviser before making an investment decision. You are reminded to refer to the relevant prospectus for specific risk considerations which are available from BlackRock websites. BlackRock® is a registered trademark of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other trademarks, servicemarks or registered trademarks are the property of their respective owners.

Notice to residents in Australia:

Issued in Australia by BlackRock Investment Management (Australia) Limited ABN 13 006 165 975, AFSL 230523 ("BIMAL") to institutional investors only. iShares® exchange traded funds ("ETFs") that are made available in Australia are issued by BIMAL, iShares, Inc. ARBN 125 632 279 and iShares Trust ARBN 125 632 411. BIMAL is the local agent and intermediary for iShares ETFs that are issued by iShares, Inc. and iShares Trust. BIMAL is a wholly-owned subsidiary of BlackRock, Inc. (collectively "BlackRock"). A Product Disclosure Statement ("PDS") or prospectus for each iShares ETF that is offered in Australia is available at iShares. You should read the PDS or prospectus and consider whether an iShares ETF is appropriate for you before deciding to invest. iShares securities trade on ASX at market price (not, net asset value ("NAV")). iShares securities may only be redeemed directly by persons called "Authorised Participants."

Notice to investors in New Zealand:

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 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.

The iShares Short Maturity Bond ETF will invest in privately issued securities that have not been registered under the Securities Act of 1933 and as a result are subject to legal restrictions on resale. Privately issued securities are not traded on established markets and may be illiquid, difficult to value and subject to wide fluctuations in value. Delay or difficulty in selling such securities may result in a loss to the iShares Short Maturity Bond ETF.  The fund may invest in asset-backed (“ABS”) and mortgage-backed securities (“MBS”) which are subject to credit, prepayment and extension risk, and react differently to changes in interest rates than other bonds. Small movements in interest rates may quickly reduce the value of certain ABS and MBS.

Securities with floating or variable interest rates may decline in value if their coupon rates do not keep pace with comparable market interest rates. The Fund’s income may decline when interest rates fall because most of the debt instruments held by the Fund will have floating or variable rates.

The iShares Minimum Volatility ETFs may experience more than minimum volatility as there is no guarantee that the underlying index's strategy of seeking to lower volatility will be successful.

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