Making the most of market strength

Mar 15, 2019

Markets charged right out of the gate in 2019.
We’re making strides to capitalize on the rally and rein in risk.

Risk assets continued their upward trend in February. Global equities are up significantly from their year-end lows and high yield bonds are having their best start to a year since 2001. Simply put, many of the macro risks that plagued markets in 2018 have subsided enough to help propel markets higher in 2019.

For one, the Federal Reserve has made a pronounced change in stance since last year, signaling patience in future rate hikes and a potential end to their balance sheet reduction program later this year. Additionally, a trade deal between the United States and China seems increasingly likely, although the specifics remain a big unknown.

We continue to see the global growth backdrop as relatively sound, led largely by the United States, and we believe markets are still reasonably priced. That said, we are closely monitoring the slowdown in economic momentum across China, and relatedly Europe, to identify any potential turning points as this remains one of the most important drivers to global growth. Additionally, we are acutely aware of how quickly risk assets have rallied back from the late-2018 downturn, and even though the world appears to be on more stable footing than a couple of months ago, macro risks still remain.

We made a number of trades in the BlackRock Multi-Asset Income Fund recently to capitalize on the sharp rebound in markets and modestly reduce portfolio risk. Specifically, we have reduced equity market risk, rotated into higher quality assets within some securitized sectors, and increased longer-term duration. Ultimately, the swift reversal from the steep selloff in the fourth quarter of 2018 to the robust rally of early 2019 is a reminder of how abruptly sentiment can change, underscoring the importance of risk management and flexibility for today’s markets.

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Michael Fredericks
Head of Income Investing for BlackRock Multi-Asset Strategies Team
Michael Fredericks, Managing Director, is head of Income Investing for the Blackrock Multi-Asset Strategies group and lead portfolio manager for the Multi-Asset ...
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