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Russ Koesterich, CFA
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Russ Koesterich, CFA, Managing Director, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a founding member of the Blackrock Investment Institute, delivering BlackRock's insights on global investment issues. Mr. Koesterich's service with the... More
My company:
BlackRock
My blog:
The Blog
My book:
The Ten Trillion Dollar Gamble: The Coming Deficit Debacle and How to Invest Now: How Deficit Economics Will Change our Global Financial Climate
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  • Video: A World Of Inflation
    What is the outlook for global inflation, and how should investors prepare their portfolios? Russ Koesterich discusses the extent of inflationary expectations in both developed and emerging markets, and reveals what investors can do to protect purchasing power given that inflation is generally on the rise across the globe. 
     
    Link to the video: youtube.com/embed/xb3PMUzJ2w4

    Carefully consider the iShares Funds’ investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds’ prospectuses, which may be obtained by calling 1-800-iShares (1-800-474-2737), or by clicking the Prospectuses link. Read the prospectus carefully before investing.
    Investing involves risk, including possible loss of principal.
    The iShares Funds (“Funds”) are distributed by SEI Investments Distribution Co. (“SEI”). BlackRock Fund Advisors (“BFA”) serves as the investment advisor to the Funds. The iShares Blog contributors are affiliated with BlackRock Fund Distribution Company (“BFDC”), which assists in the marketing of the Funds. BFA and BFDC are affiliates of BlackRock Institutional Trust Company, N.A. (“BlackRock”), none of which is affiliated with SEI.
    The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective. The information provided is not intended to be a complete analysis of every material fact respecting any strategy. The examples presented do not take into consideration commissions, tax implications or other transactions costs, which may significantly affect the economic consequences of a given strategy.
    The information provided is not intended to be tax advice. Investors should be urged to consult their tax professionals or financial advisors for more information regarding their specific tax situations.
    Neither BlackRock Institutional Trust Company, N.A., and its affiliates nor SEI and its affiliates provide tax advice. Please note that (i) any discussion of U.S. tax matters contained in this communication cannot be used by you for the purpose of avoiding tax penalties; (ii) this communication was written to support the promotion or marketing of the matters addressed herein; and (iii) you should seek advice based on your particular circumstances from an independent tax advisor.
    This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.
    Jun 03 7:18 PM | Link | Comment!
  • Monday Market Calls | Overweight Healthcare and Exiting Australia
    From isharesblog.com

    Call #1: Overweight Healthcare
    This week, our attention turns to the recent slowdown in the global economy and what it means for investors.
     
    Over the past month, both equity and commodity markets have staged a modest retreat. A large part of the weakness can be attributed to the palpable slowdown in the global economy.
     
    One potential cause of the slowdown is the lagged impact of higher commodity prices, which have historically acted as a drag on growth. Over the past two years, industrial metal prices have more than doubled back to their 2008 peak. In addition, the recent spike in oil prices is further complicating the picture. Since the summer of 2009, oil prices have risen by approximately 65%, creating an additional drag on the discretionary purchases of lower-end consumers and on economic activity.
     
    In the United States, a moderation in government stimulus is also fueling a slowdown. First quarter US gross-domestic-product expanded at an anemic 1.8% annualized pace, down from 3.1% in the previous quarter. This does not appear to be a temporary blip. The Chicago Fed National Activity Index, an indicator that has been particularly accurate at forecasting economic growth, also fell sharply in April. While the current reading does not suggest a double-dip or contraction, it does indicate that second quarter growth is likely to be closer to 2% than to the 3% estimate the market is currently expecting.
     
    In addition, the weakness is not limited to the United States. Most economies – in both developed and emerging markets – are experiencing a similar deceleration. Particularly troubling has been the slowdown in China, until very recently the engine of global growth, as the government there tries to curtail inflation.
     
    While we do believe that this global slowdown represents a deceleration rather than a reversal of the global recovery, we believe investors should consider moderating their views on future growth and adopting a more defensive posture.
     
    From an investment standpoint, a slower global economy means slower earnings growth. While we still think the equity market can advance based on high margins, low interest rates and low inflation, the gains are likely to be slower in coming months and cyclical companies are likely to face more headwinds. As a result, we favor decreasing exposure to cyclical names and sectors and increasing allocation to more defensive sectors such as Healthcare, which we first talked about in this April blog post and also mentioned in our recent global sector commentary
     
    Call #2: Exit Overweight Australia 
    Late last year, we advocated an overweight to Australian equities, which we then reiterated in early April. Since the initial call, iShares MSCI Australia Index Fund (EWA) has gained around 6.5%, modestly outperforming the Global ACWI benchmark, and we are now changing our view to neutral for a number of reasons.  (You can find standardized performance for EWA here).
     
    First, Australia no longer looks particularly cheap compared to other developed markets. Second, inflation has accelerated over the past few months. In addition, the ongoing housing boom is leading to a pickup in mortgage delinquencies, which will negatively impact the banks. Finally, China’s effort to reign in its economy is leading to a dramatic slowdown in commodity imports, a negative for the Australian mining industry.
     
    Potential iShares solutions
    Overweight Healthcare
    IYH – iShares Dow Jones U.S. Healthcare Sector Index Fund (click here for fund details)
    IXJ – iShares S&P Global Healthcare Sector Index Fund (click here for fund details)
    AXHE – iShares MSCI ACWI ex US Health Care Sector (click here for fund details)
     
    In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Securities focusing on a single country, investments in smaller companies and narrowly focused investments may be subject to higher volatility.
     
    The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Dow Jones Trademark Holdings, LLC, MSCI Inc. or Standard & Poor’s. None of these companies make any representation regarding the advisability of investing in the Funds. Neither SEI, nor BlackRock Institutional Trust Company, N.A., nor any of their affiliates, are affiliated with the companies listed above.

    Carefully consider the iShares Funds’ investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds’ prospectuses, which may be obtained by calling 1-800-iShares (1-800-474-2737), or by clicking the Prospectuses link. Read the prospectus carefully before investing.
    Investing involves risk, including possible loss of principal.
    The iShares Funds (“Funds”) are distributed by SEI Investments Distribution Co. (“SEI”). BlackRock Fund Advisors (“BFA”) serves as the investment advisor to the Funds. The iShares Blog contributors are affiliated with BlackRock Fund Distribution Company (“BFDC”), which assists in the marketing of the Funds. BFA and BFDC are affiliates of BlackRock Institutional Trust Company, N.A. (“BlackRock”), none of which is affiliated with SEI.
    The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective. The information provided is not intended to be a complete analysis of every material fact respecting any strategy. The examples presented do not take into consideration commissions, tax implications or other transactions costs, which may significantly affect the economic consequences of a given strategy.
    The information provided is not intended to be tax advice. Investors should be urged to consult their tax professionals or financial advisors for more information regarding their specific tax situations.
    Neither BlackRock Institutional Trust Company, N.A., and its affiliates nor SEI and its affiliates provide tax advice. Please note that (i) any discussion of U.S. tax matters contained in this communication cannot be used by you for the purpose of avoiding tax penalties; (ii) this communication was written to support the promotion or marketing of the matters addressed herein; and (iii) you should seek advice based on your particular circumstances from an independent tax advisor.
    This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.
    May 31 12:44 PM | Link | Comment!
  • The Case for Equities
    Taken from isharesblog.com


    With global equity markets up over 100% from their 2009 lows, many investors are questioning whether it is time to lower their strategic allocation to stocks.  While there are no shortages of risks facing global equity markets, overall we find that most markets are fairly valued and arguably already reflecting some of the risks – particularly higher inflation and interest rates – that are likely to challenge the global economy.  We believe that over the long term, equities are still likely to produce higher nominal (inflation-adjusted) and real returns than other financial assets.  We base our view on the long-term returns to equities – both real and nominal – and current valuation levels.

    Historically, returns to equities have been consistently higher than other asset classes.  This is to be expected from financial theory, as equities are more volatile than bonds or cash.  On a real or inflation-adjusted return basis, equities have also outperformed – if you include emerging markets – other asset classes throughout most regimes.  The major risk to equities remains a low growth/high inflation or ‘stagflation’ environment.

    In addition to their long-term track record, today equities have another advantage: they are reasonably priced relative to other financial assets.  Many investors remain underweight stocks following the dismal performance of the asset class during the previous decade.  The period from 2000-2009 represented the worst 10-year stretch for equities since the 1930s.  We would argue the principal cause of last decade’s negative real returns was the absurd valuations of most equity markets in early 2000.  While global stocks are no longer as cheap as they were at the 2009 bottom, current valuations are at or modestly below their long-term average.  This suggests that multiple contractions, of the type we witnessed over the previous ten years, should not be an impediment to global equity returns over the coming years.  While investors need to be modest in their expectations, on a relative basis equities are likely to produce reasonable long-term returns.

    Potential iShares Solution

    Overweight 
    EquitiesACWI - iShares MSCI ACWI Index Fund (click here for fund details)
    Mega CapsACWX - iShares MSCI ACWI ex US Index Fund (click here for fund details)
     OEF - iShares S&P 100 Index Fund (click here for fund details)
     IOO - iShares S&P Global 100 Index Fund (click here for fund details)
    Underweight 
    TreasuriesTLT - iShares Barclays 20+ Year Treasury Bond Fund (click here for fund details)

    Read and listen to the full iShares Market Perspectives for June 2011.

    Source: Bloomberg

     

    International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Bonds and bond funds will decrease in value as interest rates rise. An investment in the Fund(s) is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

    The iShares Funds are not sponsored, endorsed, issued, sold or promoted by MSCI Inc., or Standard & Poor’s, nor are they sponsored, endorsed or issued by Barclays Capital. None of these companies make any representation regarding the advisability of investing in the Funds. Neither SEI, nor BlackRock Institutional Trust Company, N.A., nor any of their affiliates, are affiliated with the companies listed above.

    May 26 7:33 PM | Link | Comment!
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