From an Investment Perspective: Against this economic backdrop, I continue to advocate that investors overweight stocks in their portfolios. Equities may not be as inexpensive as they were a year ago, but they remain more attractive than bonds and cash. That said, I do expect more market volatility next year, and I believe that investors should be selective within equity markets. In particular, I think international stocks and emerging market equities are worth investor attention, as they both appear more reasonably priced than U.S. equities.
Meanwhile, there are few bargains in fixed income markets. With rates likely to rise and inflation still low, I still advocate underweighting long-dated Treasuries and Treasury Inflation Protected Securities (TIPS), and sticking instead with fixed income credit sectors, including high yield bonds. Additionally, I continue to believe that muni bonds look attractive.
Of course, all of the above is merely a starting point for thinking about the year to come. For more information on my economic and investment views, I encourage you to check out these resources:
- 2014 Outlook—The List: What to Know, What to Do: Five “what to know” items and five “what to do” ideas for navigating the year ahead.
- Investment Directions: Our monthly look at global markets, including our asset allocation views.
- Squeezing Out More Juice: A detailed look at the year ahead from the BlackRock Investment Institute.
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.
Source: BlackRock Weekly Commentary