Keep munis in mind. Municipal bonds saw a significant rally in the first half of the year, but similar returns are unlikely in the second half. Still, given their tax-exempt status, and improving credit conditions among state and local issuers, munis offer some relative value. While they may not be cheap per se, they continue to look attractive versus both Treasuries and corporate bonds.
Go beyond traditional stocks and bonds. The traditional asset classes are not without their challenges today. Stocks are no longer cheap, and neither bonds nor cash offer compelling value. By incorporating non-traditional, or alternative, strategies into your investing arsenal, you can potentially enhance diversification and amplify your portfolio’s growth potential. Diversification doesn’t guarantee profits or prevent loss (nothing does), but it does allow you to spread your risk across a broader set of instruments that may respond differently to a given set of market conditions.
To be sure, the second half may bring surprises as well. Given today’s low market volatility, an unexpected event or a further escalation of violence in Iraq would likely cause at least a temporary correction. And we’re closely watching for any signs of a pickup in U.S. inflation.
Still, for the foreseeable future, we believe the five investing opportunities above are worth considering. To learn more about navigating markets for the remainder of the year, check out the Mid-Year Update to our 2014 Outlook – The List: What to Know, What to Do as well as BlackRock’s other mid-year outlook pieces: the special mid-year check-in edition of Investment Directions and the BlackRock Investment Institute’s mid-year investment outlook.
Sources: BlackRock, Bloomberg
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.