Our views on the Fed’s moves.
Investor expectations for lower interest rates globally, positive corporate earnings and better-than-feared economic data helped push U.S. stocks to fresh highs in July. The initial analysis of second-quarter U.S. economic data confirmed the consumer remains strong, offsetting manufacturing weakness.
Later in the month, the Federal Reserve lived up to expectations and cut its policy rate for the first time in 11 years. However, investors were left disappointed as Fed Chair Powell indicated future cuts would depend on the data and this was not the start of a broader easing cycle. The Treasury yield curve flattened, the dollar rallied to its strongest level in over two years, and the S&P 500 Index saw its worst day since May.
This backdrop is reminiscent of the environment we have experienced for much of this expansion – low interest rates globally fuelling demand for income-generating asset classes. Given our view that rates will remain low for the long term, we believe income-oriented investments will continue to be rewarding within a diversified portfolio as investors’ search for yield continues. This is especially true for investors overseas, where a large percentage of government bond yields are negative.
With the recent escalation of trade tensions, we maintain a more measured outlook for risk-taking in the BlackRock Multi-Asset Income Fund. We believe recession risk is muted and easy monetary policy will support the ageing expansion, but the evolution of trade is more difficult to predict, and tensions are unlikely to disappear any time soon. Therefore, monetary policy will continue to play an important role in market performance.
In September, we expect another rate cut in the U.S and policy intervention in Europe. Even though U.S. growth has recently stabilized, it’s hard to envision it improving enough to deter the Fed from cutting again. Thereafter, we anticipate further rate decisions to be heavily influenced by the trade backdrop, growth and inflation data.
Investing involves risk, including possible loss of principal.
The opinions expressed are those of the fund’s portfolio management team as of July 31, 2019, and may change as subsequent conditions vary. Information and opinions 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. There is no guarantee that any of these views will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Percent of net assets figures represent the Fund’s exposure based on the economic value of securities adjusted for futures, options, swaps and convertible bonds.
The fund is actively managed and its characteristics will vary.
Holdings shown should not be deemed as a recommendation to buy or sell securities. The fund may invest significantly in BlackRock equity and/or fixed income mutual funds (“underlying funds”) and affiliated and unaffiliated ETFs. As such, it is subject to the risks associated with the underlying BlackRock funds in which it invests.
Stock values fluctuate in price so the value of your investment can go down depending on market conditions.
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 or in concentrations of single countries.
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.
Asset allocation and diversification may not protect against market risk, loss of principal or volatility of returns.
Non-diversification of investments means that more assets are potentially invested in fewer securities than if investments were diversified, so risk is increased because each investment has a greater effect on performance.
The funds may use derivatives to hedge its investments or to seek to enhance returns. Derivatives entail risks relating to liquidity, leverage and credit that may reduce returns and increase volatility.
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.
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.
© 2019 BlackRock, Inc. All Rights Reserved. BLACKROCK is a registered trademark of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners.
USRMH0819U-925430
