May 112017
 

Investment Outlook

BlackRock, Inc. based in New York City, is the world’s largest asset manager with $5.4 trillion ($5,400,000,000,000) assets under management, which is even more than what Vanguard has. Due to its power and influence, BlackRock is often referred to as the world’s largest shadow bank. So when this company releases a report, investors tend to pay attention. 🙂

Last month BlackRock published its Q2 2017 global outlook. Below are some highlights.

BlackRock prefers equities over fixed income in general. For the next 5 years, BlackRock believes global equities (except U.S.) and emerging market equities are the best asset classes to be in. When it comes to debt BlackRock suggests high yield bonds and emerging market debts are likely to outperform.
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However, high yield bonds can be risky for investors with shorter investment horizons. So BlackRock says it actually prefers medium to long term U.S. investment grade bonds.
BlackRock also likes emerging market and global equities. It also believes the U.S. financial sector can benefit from rising interest rates if the trend of monetary tightening continues in the U.S.
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You can download the full BlackRock report here. 🙂

How does this change my current plan? Not much. After seeing the second chart, I have decided to continue investing in high yield bonds since it’s one of the best performers in the model. The duration is also relatively short (around 5 years.) This lowers interest rate risk. The only fixed income asset that has a higher yield is Latin American government bonds. But I don’t like it due to tax reasons. I can shelter U.S. investments in my RRSP thanks to NAFTA. But Brazilian investments in my portfolio will be subject to the full brunt of taxation. What about diversification though? I do want Latin American exposure. But that’s why I have equity of companies such as BNS conducting business there, instead of owning debt directly.

 

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3 Comments on "BlackRock’s Investment Outlook for 2017"

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FI3000
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There are lot’s of Canadian blue chips that can get you international exposure, a decent yield and still allow for the dividend tax credit. ie-MFC for asian exposure, POW for europe, TD for USA, SAP is growing into Asia, BAM has been in Brazil for over 100years etc

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