Six months down … and so far 2015 has been playing out largely to script. The divergence in economic growth and central bank policy that we identified in January had some predictable effects: a rising dollar and falling commodities prices, among them. But the first half also delivered a surprise or two: an early-year drop in interest rates and a U.S. economy that paled relative to expectations.

In the second half, both rates and the economy look to be headed up. And, of course, the Federal Reserve is priming markets for the first rate hike in nearly 10 years. We discuss all of this and more in the Mid-Year Update to The BlackRock List, our rundown of 5 to-knows and 5 to-do’s worthy of investor consideration.

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5 Things to Know

  1. Central Bank Divergence Conundrum

    Expect divergence to continue for the next several months. The dollar should remain strong, albeit with some reversals, which means downward pressure on commodities prices, inflation and the earnings of U.S. exporters.

  2. Fed Will Lift Off, World Will Not End

    Short-term bonds will be most affected by higher rates, while longer-term bond yields should inch up at a gentler pace. High-dividend stocks that have served as "bond market proxies" are also likely to suffer, but overall, stocks’ reaction to liftoff should be relatively tempered.

  3. U.S. Economy Slow, But Moving Forward

    We still believe the U.S. economy is headed in the right direction and expect a resumption in growth in the second half. Slow-but-steady growth in the U.S. economy should support modest advances in stocks.

  4. Inflation Showing Shades of Low

    Comfortably low U.S. inflation is good news for American businesses and consumers, and lending some support for stocks. But the bigger impact may be felt in European stocks, which stand to benefit from further central bank easing.

  5. With Fed in Play, Expect More Volatility

    Volatility will be higher than the unusually low levels of recent years, but market dips may present buying opportunities.

5 Investment Actions to Consider

1. Prefer Stocks Over Bonds, But Be Choosy

Stocks still look better than bonds, but look for sectors offering relative value.

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2. Look Overseas for Opportunities

Dollar strength makes American goods expensive and less competitive overseas, weighing down earnings growth prospects for U.S. companies. The earnings picture looks brighter overseas.

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3. Watch Your Step in Bonds

Even though the Fed will raise rates, don’t expect abundant income opportunity in the short term. Income seekers should broaden their reach, but with a discerning eye in fixed income.

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4. Resist the Urge to Exit

Evidence shows that time in the market produces better results than trying to time the market.

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5. Seek Growth in a Low-Growth World

Expand beyond traditional assets in an effort to optimize your portfolio's results.

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What to Know—and Do—in 2015

Time to Spring clean your investment portfolio? Read our quarterly update to The BlackRock List for the latest market insight and investing recommendations.

Rethink Your Bonds

Not All Bond Portfolios are Built The Same
An Adaptable Approach for Today's Changing Bond Markets
Managing Income for a Better Outcome

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