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    I believe that equities can continue to move higher, but it's going to be a very different market—it already has been a very different market—than it was in 2013. 2013 was a fantastic year for stocks, particularly U.S. stocks—up 30-35 percent for some segments of the market. This year is a much different start.

    The big difference is that valuations are starting at a much higher level today than they were, let's say, two years ago in the summer of 2012. What that means is that while stocks can and probably will go higher as the economy improves and assuming rates stay low, they're going to move higher at a slower pace. And the reason for that is you're no longer going to have this tailwind of multiples expanding. In other words, stocks will go higher because revenues and earnings will rise rather than because investors are willing to pay more for a dollar of earnings—which really drove stocks higher in 2013 and in 2012.

    I think investors will want to stick with equities with a couple of caveats. One, neither stocks nor bonds are as cheap as they were. Certainly bonds are fairly expensive. So one consideration is trimming back a bit on stocks, still remaining overweight stocks relative to bonds and cash but using that slight trimming to allocate to alternatives.

    The second thing is look for parts of the equity market that still offer relative value. In the United States I think that means larger, more cyclical companies. It also means having more of an allocation to international stocks that are generally much cheaper than stocks in the United States.

Investing involves risk, including possible loss of principal.

The opinions presented are those of Russ Koesterich, BlackRock's Chief Investment Strategist, as of May 29, 2014 and may change as subsequent conditions vary. Individual portfolio managers for BlackRock may have opinions and/or made investment decisions that may, in certain respects, not be consistent with the information contained in this presentation. This is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The information and opinions contained in this presentation are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all inclusive and are not guaranteed as to accuracy. Past performance does not guarantee future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the viewer.

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