Investment Directions Market Outlook

  • The Great Divergence Begins
    The Federal Reserve (Fed) ended its quantitative easing (QE) program this past month, and we think it will begin raising interest rates next year, probably over the summer. Healthy economic growth in the United States means less need for monetary stimulus here, but weaker growth outside the United States—evidenced in part by the recent collapse in oil prices—increases the likelihood of greater stimulus by central banks elsewhere, something we are seeing with Japan and Europe. Judging by the market reaction to the Bank of Japan's (BoJ's) expanded asset purchases, this central bank divergence will have a significant impact on financial markets going forward.
  • A New Political Landscape, but Does It Matter?
    While the U.S. midterm elections produced a clear victory for the Republican Party, it is doubtful that this shift in Washington's balance of power will have a long-lasting effect on markets. Gridlock is likely to continue, but there may be movement on issues like trade, health care, energy and defense.
  • A Rare Bargain: Japan
    Stocks continue to climb, leaving a world of few bargains. One exception: Japan, which is by far the most attractively priced developed market, despite rallying recently. We see solid investment catalysts on the horizon that can support stocks. The rally could go much further.
  • Emphasis Still on Equities
    Even as volatility returns, we continue to prefer stocks over bonds and cash, focusing on segments that offer relative value, such as certain international markets and cyclical sectors. Due to improved sentiment and more neutral valuations, we are moving back to a market weight in small caps. In fixed income, we are becoming more constructive on credit, especially U.S. high yield and asset-backed securities.

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.

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(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.

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