Earlier this month, when I looked back at how my first-quarter calls fared, I promised I’d provide more updates to my 2013 outlook now that the second quarter has begun.

In a new piece, “What’s Next: The Critical Answers”, I do just that. In this outlook update, my fellow authors – Jeff Rosenberg, BlackRock’s chief fixed income investment strategist, and Peter Hayes, the head of the firm’s municipal bonds group – and I are answering common questions we’re hearing from investors.  Here’s a condensed version of this Q&A.

Q: Will US stocks continue to climb?

A: Given that corporate fundamentals remain strong and US stocks appear cheap relative to bonds, stocks are likely to move higher this year. That said, economic data hasn’t kept pace with the advances, and the US economic environment is likely to get tougher this quarter. That means the pace of gains is likely to slow, and market volatility is likely to increase in coming months.

Q: What might spark a reversal?

A: There are a few potential scenarios that could trigger a major correction including worsening economic conditions in the United States and a new crisis in Europe.

Q: Will interest rates rise?

A: Rates will likely end the year moderately higher, with the 10-year Treasury yield ending around 2.25%, though the rise will likely be slow and erratic.

Q: How will the Federal Reserve act?

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