what's next in 2013

7/29/2019 What's Next in 2013

1/16

Russ koesteRIch | jeRey RoseNBeRg | peteR hAyes

whats next in 2013?12 cRItIcAl ANsWeRs oR the yeAR AheAd

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[ 2 ] w h a t s n e x t i n 2 0 1 3 ?

exi smmarDont Ignore the Upside. Wi min ar brin wi i man

am ri a b inr in ar a, ra

bi an wi m rm main r inr ar n

miin n i. Wi nia ia ar man, w

bi rnii in ri. Bw, w r

ini n riia i an qin ain inr:

Fiscal Cli. A i bnr a bn ar (r nw), b a

inin wi a a. Wi aiina niain m, mar

wi b ai, b n-rm inr n bin rnii.

US Economy. t uni sa wi mainain w b ii rw,

m i in 2012, b n nr a nw rin. l r

rnr rw a ar rr.

Interest Rates and Ination. t 10-ar us trar i

raa ri r 2013 2.25%. Infain rmain in 2%

ran n rw r i ri i.

Europe. t eran cnra Ban (ecB) an am b ain

ri banin a ab. B rrm ar i a

ar r mr awa. In manim, rw i i.

China and Emerging Markets. cina an mrin mar rain

ir rw rari in 2013, in in an wan in

uni sa an er.

Risk-On/Risk-O Redux? Mar ar i rmain ai ar in

ar, b rn mr namna a ari mr.

US Stock Market. Wi ri ar a an aain ar rai

i, w i rnii, ariar in us ma a.

Global Stocks. emrin mar r ar rw, a aain,

wr infain an rai m aii.

Fixed Income. Wa b ri r (i.., trari) a aa

bm ri. or n-rm, w mirain war ri r.

High Yield Bonds. Inr nir iriin ir xr

in i i in an an r ri. t a a nin

r min i an rrn nia, an a ra rmain w.

Municipal Bonds. Mniia bn r min axab qian

i in a ir ax. Mni ar ni ir ax-

xm a.

Volatility. Arnai a a an rai ar inrain

mainram an r rni nan ri iriain.

4

5

5

6

7

8

9

10

11

12

13

14

Russ koesteRIchgba ci Inmn

srai

je RoseNBeRgci Inmn srai

r ix Inm

peteR hAyesha BaR

Mniia Bn gr

7/29/2019 What's Next in 2013

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1 2 c r i t i c a l a n s w e r s o r t h e y e a r a h e a d [ 3 ]

Inin in 2013

SO WHAT DO I DO WITH MY MONEY?TM

3 i a 2013

1

r f

.

2

.

3c

.

RELATED RESOURCES:

s tu at a biain rm

BaR Inmn Ini

ri a mr in- iin

ba rn a ma rinania mar in min ar.

Inr bn in 2012 wi posItIve peRoRMANce

ar m a a, n in aw rzn

rii, nin rw in cina an nin us a rbm.

tan xanin ba mnar i ammain

r inn bwn nania mar rrman an

mr anin namna i.

r 2013, i m wr nqn us a

rbm an b ai. A , w x sloW But

posItIve gRoWth in uni sa, anr ar

r er, b imrin niin in mrin mar. In

nar rm, aii wi i rmain i, b niin

ma gRAduAlly IMpRove As MoRe clARIty eMeRges.

In win a, w ri r b anwr 12 riia

i an qin min r min ar, an r

inmn ia r inr ri.
http://www2.blackrock.com/global/home/BlackRockInvestmentInstitute/2013-Investment-Outlook/index.htmhttp://www2.blackrock.com/global/home/BlackRockInvestmentInstitute/2013-Investment-Outlook/index.htm

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[ 4 ] w h a t s n e x t i n 2 0 1 3 ?

12 criia Anwrr yar Aa

The New Year began with Congress fnally agreeing to a partial deal to avoid

(or at least delay) the worst o the much-discussed fscal cli o scheduled

tax increases and spending cuts. However, given the need or additional

negotiations, expect market volatility and an additional drag on the economy.

t a i a ar in ar mrnin Nw yar i br an

nin, b i imi an n r aiina niain wi i

rana in a ra n us nm an inra aii r nania

mar. si a in a rmann xnin B-ra ax

ra r iniia wi inm $400,000 an wi inm

$450,000 an a rmann maximm 15% ax ra n iin inm an aiaain r iniia an in am ax bra, wi a 20% ra

r wi ir inm. In aiin, Arnai Minimm tax a

rmann a, nmmn bn wr xn r anr ar an,

nin nwn a qr wr a r w mn.

sinian, a i n in an xnin ar ax ia, an

nimn rrm, an rrrin rna r rra ax r an

inra b iin. t armn miia ima

ax i an nin , b i i ar inm in man wa.

t mrmi wi i r a m a ra, ai ar nr-

rm b an ain uni sa ( ar), an a b

iin a an nr, nar-rm i. on r an, nar-rm aii rrn bin rnii r inr wi nr im rizn.

hw wi ia i,ax i an ninii b r?

Near-term volatility

could represent

good buying

opportunities or

investors with longer

time horizons .

1

an UnsUstainable long-term iscal PictUre

0

200

150

100

50

250%

2000 2004 2008 2012 2016 2020 2024 2028 2032 2037

DEBT-TO-GDP

Source: Congressional Budget Office, Alternative Fiscal Scenario. Note: This scenario assumes that certain policies that have been inplace for a number of years will be continued, including the Bush-era tax rates, AMT relief, payments to doctors, but not including BudgetControl Act spending reductions. Note, however, that at $109bn/yr, and at current nominal GDP of just under $16 trillion, those spendingreductions would amount to less than 1% of GDP.

7/29/2019 What's Next in 2013

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We project US growth will remain slow, but positive (much like 2012). As it seems

the worst-case fscal cli scenario has been averted, we do not orsee another

US recession in 2013.

Wi w n bi us nm wi rii rin in 2013, a bi ri

xi i a rn b iin nrmin nn, r, in wr a

nari, ann b r an a mr a ra. In, r ba a

a r a ninain a w rr wi mr ri in ar ar

ar (ra a i i) an inra rw nia a ar

rr. t ri i ar imiar 2012 ia, wi mi

i mia arn axain an nin minain r nrn. hwr,

imran, m ba ri a n, a a ar anin in

cina an an ri a rzn, wi nrib r rai

imim n us nmi .

ora, w w ra a rw ra in uni sa arn 2% r

2013 ( win ar). s bm ar rw, a nmr

rain an a inin, wi rn rw rm arain qi.

hwr, nm a b rm a rnnin in mar

an a rb us nr r.

i U su , u u ?

the Us economy is on a 2% growth Path

2

Barring a debacle in the looming debt ceiling debate, interest rates should

modestly rise through 2013, targeting 2.25% on the 10-year Treasury by yearend. Ination should remain in the 2% range unless growth or oil prices spike.

or r inr ra in 2013 i n m min b

iin ba, in wi w nin aniia an aian a a

wr a nari a ra 2011 ba. ti m w r

a m r i in ra r ar 2.25% r 10-ar us trar.

cnin i ammain i imi r m mr in

inra in 2013. hwr, wr imar ai m an armn

i ?

3

110

100

120

90

130

2006 2007 2008 2009 2010 2011 2012

Core Shipments Real Goods (Personal Consumption Expenditures)

Private Employment

INDEXLEVEL(RECESSIONT

ROUGH=100)

Sources: JP Morgan, Bureau of Labor Statistics, Census Bureau, Bureau of Economic Analysis. Data through 4Q 2012. Note that thelatest quarterly observations are preliminary, based on payrolls through November and shipments and PCE through October.

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[ 6 ] w h a t s n e x t i n 2 0 1 3 ?

Interest rates should

modestly rise through

2013, targeting 2.25%

on the 10-year Treasury

by year end.

The ECB changed the game by taking the most extreme risks o a banking

collapse o the table. But key reorms are likely a year or more away. In the

meantime, growth is elusive.

ecB prin Mari drai, ba b grman, an am b in war wa nar a r, in ar b bin r-rm bn

rira nri a sain an Ia. In mi 2012, prin

drai, wn rrrin ecB an, a, Bi m, i wi b n.

r im bin, w a im a i wr. (s ar win wn prin

drai ma i mmimn.). rrmr, a irain gr b

bai ar inia ir er gr in rzn,

aiain, r im bin, ar a gr xi (r grxi) a a a

er an nania mar arir in ar.

t ecB ain b iiian im an miia ri a rii. hwr,

ecB Ban-Ai ar a. I i n a in nr-rm nania

an nmi rbm rzn. In, m rrm a b na an rbab wi n b ni ar grman ra in in a.

In manim, rw wi b i. pimar a bn i a

aiin Arman, b a a rmin an nmi rr. ti a

xrm a aain eran mani, ia n a

ri m ir rn an r rm ra. Anr nia br

r eran ri a: ninn w ar w nwn, a i rr

w a n wa war anin inr nimn.

n n nin nar ra an armn n raiin

b iin, i i i a inr ra w rmain w r nr ami

xn nmi nrain. on r an, r infain

aar mr ar bnin, xin ai an nr mnn.

W x infain wi a a a r nw in a wa an

bn rr an b rw nirnmn.

uima, w bi a i niain wi b n ii

(i n wi anan iia rama a ma a r-rm b

nrain). ain r ba a a 2% nmi rw. cmbin wi

rin in ri a rzn bra an a cina nmi ar anin,

fi--a in trari bi in 2013, ain r iw

r m inra in inr ra. hwr, ami ninin bar

rr an wa b mar, w bi ra Rr wi mainain i

a rm n n qaniai ain a r nania mar

a infain an nin w inr ra.

ina, w ii ri r r m inrain ra. r

a ra ar, xain r riin ra a bn a a xrna

ri in nmi nr ain, inra man r trari,

an mr ra Rr bn bin. or ra r ir ra in 2013 i

mr m an in a, rfin nrn. y ra n

n wr in 2013 nr arnai nari -infi a i

ama, r i anr b xrna ri, wr rm er, Mi

r ar ea r r , wr aain ari.

ru u: w eup?

4

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Investors in the US

and around the globe

should be encouraged,

as a continuation othese trends should

provide some cushion

against weaknesses in

the US and Europe.

China and other emerging markets should regain their growth trajectories in

2013, helping cushion any weaknesses in the US and Europe.

Rn in a in imrin nmi niin in mrin mar

in nra an in cina ia. emrin mar rw a a n a

rai bai in rn ar, b in r iw a man mar ri ar

rin, w x mrin mar rain mmnm. W x Brazi an

Inia m imrmn in rw. A b nri r rm mir-

nmi awin, a mr bania arain wi b nn n mr

rra rrm. cina, in ariar, i ain a rr, wi manarin

an rai a arain an xr aarin abiiz ( ar bw).tan r, inr in us an arn b b nra,

a a ninain rn ri m in aain

wan in us an er.

4

0

8%

8/11 10/11 12/11 2/12 4/12 6/12 8/12 11/12

YIELD

SPAIN

Believe me, it will be enough.

MARIO DRAGHI, ECB President

I T A L Y

ecb to the rescUei sp 2-y u c

w u c ? w p, ?

5

Source: Bloomberg, as of 12/19/12.

9

8

7

6

5

10%

47

53

51

49

55

57

9/10 12/10 3/11 6/11 9/11 12/11 3/12 6/12 9/12 11/12

Real GDP (LHS) Manufacturing PMI (RHS)

GROWT

HIN

DEX

china recovery shoUld cUshion the Us and eUroPe


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[ 8 ] w h a t s n e x t i n 2 0 1 3 ?

cina nw nrain ari i bin rm a nain m

b rnin a rnr rm n qarr nmi wwn. Inmn an

ain mnar i a ai rn in nm, in r

qarr 2012 nmi iniar in ii rrir r 2011. Wr

rrman an b mainain r n rn n riia n i

i inmin ar ari.

can wi m w. In Mar 2013, ia rw ar wi i b

a 7% a Naina p cnr cnrn. Aiina, rrm an

ii n b immn mwr cin nmr. drawin n

rm ri wr raniin, inian marnmi i an rrm

i wn b inr ni a in 2013. lnr rm, r cina wi

n riia n a an ambiin nr-rn rra rrm

in cina a ar rqir wan i rm i raiina rian n xr an

inmn- rw war a mr baan an ainab rw nami.

B rrn rar a cina rrar an

raba rw r min ar.

2012: a year o risk-on then risk-o

Change will come

slowly, but the

current trajectory

suggests that Chinashould support

rather than drag

global growth or

the coming years.

With continued budget negotiations, markets are likely to remain volatile early in

the year, but should respond more to undamentals i risks are averted.

A 2012 wa a ar in wi mar aar wr ai, i rmain a

ar ri-n/ri- rain a inr nin ra mn

in er ar in ar an iia rn in us a ar rw a .

t ar bw w a wi r r r 2012 an x

inm ra , i wa ar a m ri. An ar-ar ra b in mi-

ar ar-in ri arin a ima mr in mix rrman.

In nar rm, ni w mr ari n uni sa b rbm,

w x mar wi rmain ai. hwr, wi ra 2012 ri

aa a w nr 2013, inr a mr ii rn r mar an ri a in nra.

w 2013 p -/- 2012?

6


1,400

1,300

1,200

1,100

1,500

1.0

1.5

2.0

2.5%

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT DECNOV

INDEXLEVEL

YIELD

S&P 500 (LHS) 10-Year Treasury Yield ( RHS)

7/29/2019 What's Next in 2013

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While risks are elevated and valuations or US equities are relatively high,

we still see opportunities, particularly in US mega caps.

W nra i qii r 2013, b w ar n namr. us mani r

b mri ba, n rr r marin an a bn n a n-

rm rn rrmin r mar. In r iw, i rn ain

r mar ma b narin an n. ti i n a, wr, a

rnii ann b n in us in ariar, w a a arab

iw war ar us qii.

Ma a in uni sa rrm r in 2012, i aar

a b m mri ( ar). In aiin, ar i m rab

mn mar wi a rrn-n-qi in x r , an man

r iin a a rm ri. An i r r an inrin ni

a in i xr ar rwin inrnaina mar, main i

nii an in mi rw.

A an aiina nirain, i imar ann r n

b i, w w x a - in ri a. In i nx, r

inr wrri ab nin a rbm r an r -inwwn, us ma-a mani nrab an r ,

ariar mi an ma a.

w u Us ? w p ppu ?

7

valUations by market caP: 1997 to Present

1997 2001 20031999 20072005 2009 2011

Mega Cap (S&P 100) Small Cap (S&P 600)Mid Cap (S&P 400)Large Cap (S&P 500)

5

10

15

20

25

30

35

PRICE-TO-EARNINGS

RATIO

VULNERABILITY

MORE+

LESS


7/29/2019 What's Next in 2013

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[ 1 0 ] w h a t s n e x t i n 2 0 1 3 ?

long-term stock Perormance:

emerging markets oUtPerorm develoPedP msci em . msci w, 20022012

Our avorite long-term theme is emerging markets (EMs) or aster growth,

cheap valuations, lower ination and more muted volatility.

oi uni sa, w ar mar nri an

rnii in nrrn er. B r ari n-rm m i mrin

mar. di raiin in 2012, inr nir iin wi eM r

r ran: ar rw ( ar), a aain, wr infain an wr

rai aii.

sarin wi rw, w n x eM nri rrn ir 2010 a

anim n (r, in a cina, r). ta ai, wi w x wr

rw, rai bwn mrin mar an mar rw i i

rmain rm in ar eM. d nri nin r wi

r drain, b an mrai. In marin, eM nmi

ar nmbr b b, n mr ainab a ii an, r

m ar, a m mr arab mrai.

di i aana, eM ar rain a a inian inr

20% mar qii. hiria, i a rrn a

nr in. Aiina, w w ar a wi i mr ai in anab n, rai aii bwn mrin an mar

a i nrin. W x i rn nin, an xn a

rai ri eM a i rin, inr nir inrain

aain i ara mar.

o r, inr n rmmbr a mrin mar arr wi m

m i ri, inin ra rin rrn, imi iqii,

rnmn rain an ibii bania aii

ar iia, nmi r r mn.

w p qu?

8

Source: Bloomberg, as of 12/31/12. Past performance is no gua rantee of future results. It is not possible to invest directlyin an index. Emerging markets represented by MSCI EM Index, developed markets represented by MSCI World Index.

0

200

100

300

400

Emerging Markets Developed Markets

INDEXLEVEL

20122011201020092008200720062005200420032002

Despite trailing in2012, investors shouldconsider sticking

with the EM theme

or our reasons:

aster growth, cheap

valuations, lowerination and lower

relative volatility.

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1 2 c r i t i c a l a n s w e r s o r t h e y e a r a h e a d [ 1 1 ]

The secular bull market in Treasuries is over and what used to be risk ree

(i.e., Treasuries) has actually become risky. Over the long term, we suggest

migrating toward credit sectors.

A i arir, r r a r a m inra in ra, b

ri nari wr ra (ar xrinin i r a a r ar)

a b anw. siin wi raiina r x inm i us

trari r a aia a-an r fi--a mar. Rin

n b i, wr, i ri inr nrain an w

i inr ra (an ri). hn, n a ri bai, ain inr

ra ri ri a iin ma n in nrain m,

b r r ar m xr inr ra wi a a

ra n ri rrman.

or nr rm, inr b rin rrin ir x

inm ri aa inr-ra-nii r. cnra ban

mnar im wi ra w r rab r, b w bi

biaan ria i r irin. gin rwar, ra

imb, amin m rw in uni sa an a rin in xrna

r a rzn rii an inrna us a nraini. sia,

w x inr ra ri m r 2013 arn 2.25% r

10-ar us trar. An wa, min b iin ba, an wi a

r nraini, wi man a nirab ran in ra, nia a

ar a 50 bai in n ir i a 2.25% ra.

A m, an inra in ra ii ri in nr-rain,

inr-ra-nii x inm a rnmn bn. t inmn

an b ra b x inm r rin a br baan ri an

rwar: ri ara a rra, i i an mniia b, mrin

mar an ri mn mra mar. Inr an r

inr ra niii b aain awa rm raiina bnmar

r ma n an war fxib n a a rar aai r inr ra ri an a ran ri ri r.

i 30- u ? h u p p?

9

Source: Lipper. All Information as of 11/30/12. AUM in billions.

0

2

4

6

8

10

0

200

400

600

800

1,000

1996 2000 2004 2008 20121992

Lipper Short Invest Grade Lipper Interm Invest GradeBarclays US Agg Bond

INDEX

YIELD

DEBTFU

NDSAUM

risk-ree has become the new riskyb Us a b i y . aUm g lpp s

i g d u

Going orward, rates

should climb, assum-

ing modest growth in

the United States and

a reduction in exter-

nal stresses such as

the eurozone crisis

and internal US

fscal uncertainties.

7/29/2019 What's Next in 2013

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[ 1 2 ] w h a t s n e x t i n 2 0 1 3 ?

high yield still has room to rUn

High yield still looks attractive as yields continue to more than adequately

compensate or risks. The asset class continues to oer compelling yield

and return potential, and deault rates remain low. However, valuations in

traditional high yield bonds are not as attractive as in recent years, limiting

return potential in 2013. Investors should consider diversiying their exposures

in high yield to include loans and secured credit.

Bra, a rmn ammai mnar nirnmn r

rrain a b mar an rnanin in. ta

a ri w, wi ri wnin ri inrmn. W x

a ra rmain w n in a wa rw nirnmn. crra a

ri i n a ira a i i brrwr a a

mar rnan b, rin inr xn, xnin marii an

brin ir rm.

rrmr, man wa mani (a w a m ari nr)

wr wi in 20082009 nania rii, ain bin a mar wi

ra rnr baan , nabin m rar abii war an

nmi wnrn. ta n man i i wn a i b ri-;

in in rm wr i in 2013 man a n b mr aia

wi a a an in a ar. lwr arin i an ir arin

ri man wrin a a rrn rin in 2013 rm a w

ar b-ii rrn in mi i in ii r 2013.

A , inr nir iriin ir xr in i i

in an an r ri. t r i a mr min aain

an ia i i bn. ora, wi i nrain wr rrn in 2013,

i i, an an r bn a a i r arai i in

nx am ba iqii a a ri a ba in 2013.

a u ?

10

0

500

1000

1500

2000

0

4

8

12

16%

1990 2004 2008 20121986

Trailing 12 Month Default RateSpread-to-Worst (bps)

SPREAD-TO-WORST(BPS)

TRAILING12MONTH

DEFAULTRATE

Source: JP Morgan. As of 11/30/12. Fixed income yields are represented by yield to worst (The lowest potential yield that canbe received on a bond without the issuer actually defaulting (e.g., through prepayment provisions)). Spread is the differencebetween the yields of two bonds with differing credit ratings.

High yield still looks

attractive as yields

continue to more than

adequately compen-

sate or risks.

7/29/2019 What's Next in 2013

13/16


w u up? u, ppu u?

11Municipal bonds oer compelling taxable equivalent yields in the ace o higher

taxes. Despite chatter in Washington, munis are unlikely to lose their tax-exempt

status.

Mniia bn r min axab qian i in nx ir

ax. Wi in iminain r imiin r ax-xm a

nin ra in ain, w bi inr n b ar .

In a, w in brar ax rrm wi b i ai in w ranr

niain a bn bwn cnr an rin. t rmbin

ar nin nw, an wi w bi r b amn, w n

bi ax xmin wi b imina. s a an w r imair

mniiaii abii n ir rain an ain ir mmnii.

r inr in inm an a, w bi ax-xm mniia bn

r a rai us trari, r xam. ta, inr an bain a

inian ir i rm an inx nra biain mniia bn an

rm a marab inx n-a trari ( ar bw). W bi an

inmn in mniia bn i ra b wa mr wa arn.

Inr rmmbr a r ma b inrmain aaiab n nania niin ir mniia rii an r bi rrain.

Aiina, mar r rain mniia bn ma b iqi

an r axab bn an a rin mniia bn inm ma b axab

(ia, m inr ma b b Arnai Minimm tax (AMt)

an aia ain iribin, i an, ar axab).

50

100

125

75

R

ATIO

150

175%

10-Year Average

2007 2008 2009 2010 2011 2012

mUniciPal bonds are oUtyielding treasUries10-y mu--tu y r, 20072012

Sources: J.P. Morgan and Bloomberg.Notes: Daily yield on 10-year, AAA municipal bonds vs. yield of 10-year US Treasuries, as of 12/31/12.

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[ 1 4 ] w h a t s n e x t i n 2 0 1 3 ?

h i u p?

12Alternative asset classes and strategies have become mainstream and oer

the opportunity to enhance portolio diversifcation. We suggest investors

consider proessionally-managed, exible mandates that allow portolio

managers to take advantage o tactical opportunities.

Wi aii a nra ri inr ri in nrain a, nmi

an rar wr, i a nir a wir arra in ai r

a. In, arnai inmn ar aarnai raiina

an bn inmn ba n a a n ba irn

in a ri.

Wi arnai iria a bn aaiab n r nrir

ria n (wi i a a r r man inr), a ar a

aaiab r a rai nw innain: arnai n-n ma n.

Ma n ar in ri bn ai iqii, i

ranarn an w inmn minimm. Inrain, a nmbr ma

n rir a bn rin n a ri a bn wi

a rin xr arnai rai, a fxib mana, n/

r inmn, ra a an mmii.

A inmn nai ri, an arnai a a w ir wn. Inmn

a n an ria qi n n na in ai in-mn ara, an in in i rrn, an nai in

ri (inin nia r a x rinia amn in).

A, inmn a n ri rar riin r aain an

n m mx ax rr. Mr nra, m arnai in-

mn a xrin ri xrm aii.

alternatives or all investors

op-e muu u r c-e/P u U P u

a N/w barrir inin

tia rqir $1 miin r mrin n wr

ua rqir $5 miinr mr in inab a

iU

Mr nrain brar rriin

Brar rni lar rni

tp hi Mra i tia imi

mu lw

(ia arin a $1,000)

Mra

(ia $10,000 $50,000)

hi

(ia $100,000 r mr)

lqu dai prii (ia mn qarr) prii (ia qarr r nr)

Manamn + r xn

Manamn + r xn; mab iribin an/r rrman

Manamn + r xn; i b iribin an rrman

a, tp, lqu g P e ru

Source: BlackRock.

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15/16


r br r wr, w bi 2013 i i b a ar wn mar a

wi n aain r ar in an iiian an imar. Aiin a

b armn air, wi ra rr n n-rm us a

, an rra rrm in er, na rra nin, ri

ain an rr m inr nn. r nw, w rmain ai

imii, b ar nizan a ar wr n rrr ba

nm rmain. gin i , w r ia r rnin r 12 Anwr

in in r inr ri.

THREE INVESTMENT ACTIONS FOR 2013

1 2 3

trnin Anwr InInmn Ain

r i n w

Allocate to lexible core

bond alternatives

}cr aain a r

nnra inr ra ri

wi imi i nia.

Increase exposure to

credit sectors

}hi i, ban an, mrin

mar b, mniia an

r ara mar an

r nan i, inm,

rrn an iriiain

rnii.

Seek out non-correlated sources

o return

}l r rai a an

inra iriiain an

m aii.

g a v

Invest in high-quality dividend

paying equities rom around

the world

}exan xr inrnaina

, inin mrin

mar an us mani wi

inrnaina xr. gain

xr mar

mar a w.

Allocate to lexible, unconstrained

strategies

}l r ba rrn

rnii ar a

a an rai.

Build a portolio to manage

volatility

}vaii a b wi rmain

i rai iri ;

irin a m ri r

ir r rrn wi

b riia.

c w n i

Look beyond traditional income

sources to build a diversiied,

risk-managed income portolio

}cnir iin-ain

qii an xib inm-

rin inmn rai

iri r inm.

Construct diverse sources

o income streams within

ixed income

}hi i bn nin

arai r

n-rm, a ban an

an rr bn.

Increase allocations

to municipal bonds

}Mni bn r min

axab qian i in

a ir r ax.

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16/16

Not FDIC Insured May Lose Value No Bank Guarantee

The opinions presented are as of January 2013, and may change as subsequent conditions vary. Individual portfolio managers for BlackRock may have opinions and/or make investment decisions that, incertain respects, may not be consistent with the information contained in this report. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation,offer or solicitation to buy or sell any securities or to adopt any investment strategy. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed byBlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance does not guarantee future results. There is no guarantee that any forecasts made will come topass. Reliance upon information in this material is at the sole discretion of the reader.

The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. No investment is risk free. International investinginvolves additional 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.The two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers tothe possibility that the issuer of the bond will not be able to make principal and interest payments. Investments in commodities may entail significant risks and can be significantly affected by events such asvariations in the commodities markets, weather, disease, embargoes, international, political and economic developments, the success of exploration projects, tax and other government regulations, as well asother factors. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

FOR MORE INFORMATION: www.blackrock.com

2013 BlackRock, Inc. A ll Rights Reserved. BLACKROCK, BLACKROCK SOLUTIONS, iSHARES, SO WHAT DO I DO WITH MY MONEY,INVESTING FOR A NEW WORLD and BUILT FOR THESE TIMES are registered and unregistered trademarks of BlackRock, Inc. or itssubsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners.

Lit. No. INV-OUTLOOK13 AC6451-0113 / USR-1285

W i BaRA wr ar inmn manar, a BaR w bi i

r rnibii inr a iz in Nw Wr

Inin. W wr bi ri ba mar ini, bra

aabiii, nbia inmn ai an ri manamn

xri im rqir.

The Resources You Need or a New World o Investing

Inin wi BaR i a r a a, ra

an inmn , a w a xni mar inin an ri

anai, bi nami, ir ri im rqir.

The Best Thinking You Need to Uncover Opportunity

Wi r in a rnr b, r 100 inmn am in 27

nri ar ir b inin rana a ini in ainab

ia a ri ir br, mr nin rrn r im.

The Risk Management You Need or Peace o Mind

Wi mr an 1,000 ri rina an rmir ri manamn

n, BaR i in aa nran ri a

a b mana r rrn r in n an brin ari

m anin inania iain.

BlackRock. Investing or a New World.

what's next in 2013

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