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April 21, 2015

The BlackRock List: What to Know and What to Do in 2015

By Russ Koesterich, CFA, BlackRock

So far, so good. With one quarter down, events are playing out largely as we expected so far in 2015. But financial markets are dynamic and deserving of constant examination. With that in mind, we are pleased to present the Spring Update to our 2015 Outlook: The BlackRock List.

(EconMatters Note: Readers may review or download the original BlackRock 2015 outlook here and 2015 Spring Update here, both from our Scribd page)  

5 Things to Know in 2015

1. Central Banks Diverge: Dollar Likely Higher

We expect divergence to continue for at least the next several months. Continued dollar strength will exert downward pressure on commodities, inflation and the earnings of U.S. exporters.

2. Fed Ready to Hike – But Rates to Remain Low

Short-term bonds will be most affected by higher rates, while longer-term yields should inch up at a gentler pace. Stocks may see brief stutters, but should recover.

3. U.S. Economy: Inching Up, Not Breaking Out

The U.S. is still stronger than other developed economies. We expect growth in the area of 2.5% to 2.75% this year—enough to support modest growth in stocks.

4. Inflation: Still Low – In Some Places, Too Low

Tepid U.S. inflation is good news for American businesses and consumers. Ultra-low inflation in Europe should lead to continued stock-friendly policy from the ECB.

5. Expect Stocks' Bumpy Ride to Continue

While volatility will be higher than the unusually low levels of the past few years, market dips may present buying opportunities for long-term investors.

5 Things Investors Should Consider in 2015

1. Prefer Stocks Over Bonds, But Be Choosy

Stick with stocks for long-term growth. Downturns have always returned to upturns.

2. Look Overseas for Opportunities

Most stock market bargains live outside the U.S. Ensure you’re taking advantage.

3. Watch Your Step in Bonds

With rising interest rates, bond principal is at risk. Be wary of shorter maturities in particular, which would be most affected by a Fed rate hike.

4. Resist the Urge to Exit

It’s important to hold some cash, but too much can set you back. Cash comes with a cost after inflation and taxes.

5. Seek Growth in a Low-Growth World

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

Russ Koesterich, CFA, is the Chief Investment Strategist and Head of the Model Portfolio & Solutions Business of BlackRock. He is a regular contributor to The BlackRock Blog.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters. © EconMatters All Rights Reserved | Facebook | Twitter | Free Email | Kindle
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