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Strategic Income Opportunities Fund Monthly Insight

Our view on rate cuts

September 25, 2019

This is what we love to do: find the best value in the world, build a balanced portfolio, seek consistent returns.

– Rick Rieder, CIO and Co-Head of Global Fixed Income

Reflecting on the Fed’s latest move.

The Federal Reserve’s September meeting ended as investors broadly had expected, with a 0.25% rate cut, bringing the target range to 1.75-2.00%. While this move continues the Fed’s efforts to maintain the U.S. economic expansion, we believe it is the global environment that is actually causing the need for the rate cut (and possibly more), given synchronized slower growth.

We view this rate cut as incremental in the grand scheme for the rest of this year and as such, didn’t pack much of a punch. We believe each rate move from here should be designed to deliver a powerful statement to elicit more confidence among companies, investors and consumers.

We are keeping a keen eye on trade discussions, oil market dynamics, financial market liquidity, Brexit developments, the pace of slowing employment conditions, and as always, inflation readings to discern whether the Fed will need to cut rates again in October, or can wait until December, or will act in both months.

We expect the Fed’s accommodative monetary policy along with investor demand for relatively safer assets amid slowing global growth and trade tensions to continue putting downward pressure on U.S. interest rates.

In the BlackRock Strategic Income Opportunities Fund, we continue to maintain a level of duration (sensitivity to interest rate movements) near the high end of the fund’s historical range. However, we recently reduced duration slightly to 3.0 years (as of 8/31/19) as we moved some of the fund’s U.S. rate exposure into shorter-dated bonds. We also marginally reduced European rate exposure when expectations for policy action from the European Central Bank appeared to be fully priced in.

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Bob Miller
Head of U.S. Multi-Sector Fixed Income
Bob Miller, Managing Director, is head of the U.S. Multi-Sector Fixed Income team within BlackRock's Global Fixed Income group and a member of the Global Fixed Income ...
Rick Rieder
Chief Investment Officer and Co-Head of Global Fixed Income
Rick Rieder, Managing Director, is BlackRock's Global Chief Investment Officer of Fixed Income, and Co-head of BlackRock's Global Fixed Income platform, a member of ...