What's Next: The Critical Answers Spring Update

Will US stocks continue to race ahead? We believe companies remain strong enough that US stock market advances can endure. However, we expect that the pace of gains will slow and market volatility will increase in the coming months.

What might spark a reversal? We would point to three scenarios that could trigger a correction: worsening economic conditions in the United States, a new crisis in Europe, and the "unknown unknowns."

Will interest rates rise? How will the Fed act? Rates will likely end the year higher, but getting there will include more of the ups and downs we recently experienced. The Fed likely begins to back away from its easy money policies with significant forewarning to ease market concerns.

What's the outlook for China and emerging markets? The signals have been mixed, but it is too early to suggest China is a risk to global growth rather than a driver. Overall, we expect emerging markets to broadly outperform developed markets.

US or international stocks? Both. However, we continue to favor non-US and emerging market equities over US stocks. We also suggest a continued focus on dividend-payers in all regions.

Where are the opportunities in fixed income? Although we are a bit wary of high yield valuations, we still like credit sectors, including bank loans. We also see opportunities in municipal bonds.

What equity market sectors are most attractive? We like mega caps in the US, and the global technology and energy sectors, but we're keeping an eye on relatively high valuations.

What is the outlook for gold and oil? In the current "risk-on, dollar-on" environment, oil should weaken, particularly if Chinese growth softens. A strong dollar should also prevent significant increases in both oil and gold prices.

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The stated investment preferences are the opinions of the authors and do not reflect individual investors' risk and return goals. Individual investors should consult with their financial professional about how to implement these opinions in a portfolio that is suitable for their goals and risk tolerance. These views do not necessarily reflect the investment decisions made within specific BlackRock portfolios. 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 opinions expressed are as of April 15, 2013, and may change as subsequent conditions vary. Individual portfolio managers for BlackRock may have opinions and/or make investment decisions that, in certain respects, may not be consistent with the information contained in this report. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

Investment involves risks. Stock and bond values fluctuate in price so that the value of an investment can go down depending on market conditions. There is no guarantee that companies will continue to pay dividends. International investing involves 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. These risks are typically heightened for investments in emerging markets. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments. There may be less information available on the financial condition of issuers of municipal securities than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. A portion of the income from municipal securities may be taxable.

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