As 2013 draws to a close, you may be wondering what to expect in the year ahead, and how to prepare your portfolio accordingly. A new piece, BlackRock’s 2014 Outlook—The List: What to Know, What to Do is here to help you.

1. 2014 OUtlook
THE LIST
What to Know, What to Do

2. 2014: (Mostly) Moving in
the Right Direction
A Strong 2013…And
Potential Upside for 2014
2013
Asset Class
Returns
U.S. Stocks
+29.1%
International
Stocks
2014
+21.0%
Emerging
Markets Stocks
-1.2%
10-Year U.S.
Treasury Yield
Outlook
2.75%
Source: Bloomberg. As of November 30, 2013.
U.S. Stocks are represented by the S&P 500
Index, International Stocks by the MSCI EAFE
Index, and Emerging Markets Stocks by the MSCI
Emerging Markets Index. Past performance does
not guarantee future results. You cannot invest
directly in an index.
In 2014, we see a world of opportunities—even if they often appear
elusive. While uncertainty is high, your goals haven’t changed. You
still need to save for retirement or find a way to get the income you
need from your investments. We understand that investors feel
overwhelmed by the challenges and don’t know what steps to take.
That’s why we collected our 10 best ideas for the year ahead, which
we call The List. We offer five “what to know” items and five “what
to do” ideas, each with a specific takeaway—designed to help you
navigate the markets in 2014.
So what to expect in 2014? Many of the conditions of the last few years—
slow growth, low interest rates, and very low inflation—are likely to persist.
Not an ideal environment, but one that should support further gains in
stocks, and perhaps hints at a virtuous cycle of global growth that could
be possible if the stars align.
However, there are risks to consider. We expect interest rates to climb, which
could expose traditional bonds to potential losses. Given the strong run-up
in stocks over the past few years, now is a good time to consider diversifying
outside the U.S. Moreover, political dysfunction in Washington (and geopolitical
events) presents a risk of increased volatility.
Where does this leave investors? Although many continue to sit on the sidelines,
we believe the risks of not investing—missing out on market gains, having
your cash holdings erode due to inflation—outweigh the risks of being in the
market. There is no free lunch, and there are risks to be aware of (and to
manage), but meeting your financial goals means taking steps today.
And The List is our guide to helping you do exactly that.
Investment Actions for 2014
Rethink Your
Bonds
[2]
2 0 1 4 O u tlook : T he L ist
Generate Income,
But Don’t Overreach
Seek Growth,
Manage Volatility

3. the BL ACKROCK list
What to Know—and Do—in the Year Ahead
The Economy: Growing, Albeit Slowly
Inflation: The Risk Is to the Downside
Employment: Jobs Are Growing, But Wages Are Not
What to Know
Interest Rates: Higher, But Not Through the Roof
More Policy Uncertainty Means More Volatility
Stick With Stocks…For Now
Seek Greater Growth Opportunities Abroad
What to DO
Bond Buyers Beware: Once Thought Safe, Now Risky?
Consider Munis for Tax-Exempt Income
Go Beyond Traditional Stocks and Bonds
W hat to k n ow , what to do
[3]

4. 1
The Economy:
Growing, Albeit Slowly
The U.S. economy
We expect U.S. economic growth to improve in 2014.
should edge past the
With the Federal Reserve’s easy-money policies as a tailwind, stronger
household balance sheets, a healing housing market and lower energy
prices should bolster corporate and consumer confidence and support
a pickup in growth.
2% growth rate of
recent years, with global
growth also improving—
good news for stocks.
Risks remain, however. First, the level of dysfunction coming out of
Washington, D.C. presents a significant risk to both the economy and
markets. Given the ongoing weakness in the labor market, including subdued
wage growth, we are cautious about how strong the economy could be.
All told, we believe the U.S. economy will edge past the 2% growth rate that
has defined the post-recession environment and come in at around 2.5%.
Global growth should accelerate from 3% in 2013 to around 3.5% next year.
This should be a positive for stocks, and is also a range that provides the
Federal Reserve with some flexibility in managing policy.
What to Know
SL
[4]
OW
Grow
th
2 0 1 4 O u tlook : T he L ist
Ke y Take away
Fed policy, healing housing markets
and lower energy prices should all
support modest economic growth and
equity markets.

5. 2
Interest Rates: Higher,
But Not Through the Roof
Modestly stronger growth should lead to slightly higher
interest rates—but we do not expect a sharp or rapid acceleration.
As the Federal Reserve begins to slow its extraordinary bond-buying
program, we believe the 10-year Treasury yield will modestly climb
around 0.5% by the end of 2014.
Even a small increase in interest rates can erode the value of your bonds
and hit your net worth, as well as increase your cost of borrowing for
everything from homes to cars.
Question for
your portfolio:
Are you prepared for
a higher-interest-rate
environment?
To avoid these sorts of negative economic consequences, the Fed will
likely promise to keep short-term interest rates low for some time.
Ke y Take away
What to Know
We don’t expect a sharp rise in rates, but even
a small
increase would weigh on your
SI
N
G
te
RI
rethink your bonds.
s
bonds and possibly your net worth. Time to
In t
erest
R
a
W hat to k n ow , what to do
[5]

6. 3
Inflation: The Risk
Is to the Downside
Question for
Inflation remains close to historic lows, not just in the United
your portfolio:
How should you invest
in a slow-growth,
low-inflation world?
States but also in other large developed markets. We don’t see that changing
in 2014. If anything, the risk in some developed regions is actually deflation.
It is a question we often hear from investors: Why is inflation so low?
Essentially, there are three reasons: wages are not growing very strongly,
factories still have excess capacity (which means they don’t charge higher
prices for their goods) and lending activity remains depressed.
Some developed regions, notably Europe and Japan, will continue to flirt
with outright deflation. None of this suggests that inflation won’t eventually
increase. But for now, conditions indicate inflation is likely to remain low, at
least for the next year or so.
What to Know
Ke y Take away
Be cautious of asset classes like TIPS,
commodities and gold that are often used
e
[6]
r-
I
O
N
a
N
to protect against inflation.
Fl a
t INFL
AT
2 0 1 4 O u tlook : T he L ist

7. 4
Employment: Jobs Are
Growing, But Wages Are Not
We should see more people getting jobs in 2014
Weak wage growth
and the unemployment rate should continue to go down.
is bad news for the
However, that good news is tempered by the strong possibility that U.S. wage
growth is likely to remain subdued. While improving economic growth may
provide some upward pressure on wages, factors such as demographics,
technology and global labor competition are long-term trends that are
working to keep income levels low.
stocks of companies
Why does this matter? If income growth remains weak, household spending
is also likely to remain soft. And that means consumer spending is not the
driving force for the economy like it once was. Unless we see a drop in savings
or a pickup in borrowing, this factor could mean we see slower overall growth
for a longer period, and potentially, lower stock market returns for certain
companies most dependent on consumer spending.
Ke y Take away
that rely on discretionary
spending by consumers
—better value can be
found elsewhere.
What to Know
Slow income growth and sluggish
consumer spending could make consumer
for some time.
E
SS
E
growth in low gear
PR
may keep economic
S
discretionary companies less attractive. It also
URe ON WA
G
W hat to k n ow , what to do
[7]

8. 5
More Policy Uncertainty
Means More Volatility
Should Washington’s
political drama continue,
it likely means higher
volatility—a reason to
look outside the U.S. for
investment opportunities.
Centered in Washington, political partisanship and
dysfunction continue to represent a risk for the economy and the
markets. We may see ongoing political wrangling around budget and debt
issues, and topics such as implementing the Affordable Care Act are likely
to promote additional uncertainty. 2014 also brings with it the midterm
elections—an environment that is certain to promote bitter partisanship.
Meanwhile, a trend of growing populism—not just in the U.S. but globally—
which can lead to economically unsound policy decisions, represents an
additional risk. As always, geopolitical risks lurk as well—we would cite
escalating tensions in Asia and the Middle East. All of this creates the
potential for increased market volatility.
What to Know
Ke y Take away
Expect volatility
to increase if—
or when—political dysfunction again emerges.
[8]
t
Po
li
y
This is also one reason why it makes sense
cy
Uncer
i
ta
n
2 0 1 4 O u tlook : T he L ist
to be diversified
outside the U.S. and
consider minimum volatility strategies.

9. 6
Stick With Stocks...For Now
U.S. stocks had an extraordinary year in 2013, particularly after
Equities are no longer
accounting for the fact that economic growth has disappointed. Given the
magnitude of the gains, investors are increasingly concerned that global
stocks are once again getting overvalued, if not in an outright bubble.
a bargain, but we
Our take: stocks are no longer cheap, but are not in a bubble. There are some
areas of the market that we believe are unjustifiably expensive (U.S. small
caps are a chief example), but overall we think prices still can go higher.
It is important to remember that stocks still represent a better value than
cash and bonds. In short, we would remain overweight equities.
still overweight stocks
believe investors should
for the time being.
However, there is an important caveat. Further gains in the market will need
to come alongside growth in corporate earnings. Given the environment we
described—slow economic growth, sluggish wage growth, lackluster consumer
spending—that may be hard for companies to achieve. If we do see market
gains without a corresponding increase in corporate earnings, we would take
that as a warning sign.
Ke y Take away
What to DO
If you’re out of the market, there’s still time to get
off the sidelines.
YO
We would still
overweight equities.
UR
P OR TFO
LI
O
W hat to k n ow , what to do
[9]

10. 7
Seek Greater Growth
Opportunities Abroad
Question for
The United States is one area of the world that is looking
fully valued. However, outside the U.S., stocks appear more reasonably
your portfolio:
priced. This may be a good time to seek greater growth opportunities abroad.
Should you increase
For investors still underweight international equities (and that includes most
U.S. investors), we’d consider paring back some U.S. holdings in favor of nonU.S. stocks. Europe, in particular, is an area that seems reasonably valued.
To be sure, Europe suffers from numerous challenges, including sluggish
economic growth, and has a long way to go in implementing the reforms that
could spark stronger growth. But stock prices in Europe are much more
attractive than those in the U.S.
your allocation to
non-U.S. stocks?
What about to
emerging markets?
In addition, for those investors with a strong stomach and long time horizon,
we would suggest considering emerging markets, which offer a combination
of attractive value and compelling growth prospects.
What to DO
Ke y Take away
Pare back some U.S. holdings and
e
r
na
t
tio n a l s
Em
r
e
International dividend-producing
stocks are an attractive way to
get exposure outside the U.S. and
gain some incremental yield.
[10]
2 0 1 4 O u tlook : T he L ist
k
o
ts
O
e
P OR TF
I
OL
t
UR
ped Mar
c
In
YO
lo
ks
v
e
et
De
s
consider non-U.S. stocks.
gi
ng M ar
k
In addition to developed
markets, don’t ignore
emerging markets.

11. 8
Bond Buyers Beware:
Once Thought Safe, Now Risky?
Put simply, there are few bargains in traditional bonds
Question for
(meaning investments concentrated in Treasuries). The main reason is the
Fed and other central banks have been on a buying spree in recent years,
propping up bond prices (and, thus, driving yields lower). Given the Fed’s plan
to pull back on its extraordinary bond-buying program, the risks to traditional
bonds are elevated.
your portfolio:
While the Fed appears set to begin pulling back on these programs (i.e.,
“tapering”), the leaders of the Fed’s policy committee have been working hard to
assure investors that interest rates will remain low for longer. For that reason,
we expect the central bank to act gingerly to smooth any market reaction.
Do you need to rethink
the way you’re investing
in bonds?
In this context of low rates and ample liquidity, investments such as high
yield bonds should remain an attractive source for income. Being flexible
and diversified globally remains key, as the possibility for more accommodative
central bank actions in Europe creates potential opportunities there, and
selectivity in emerging markets along with cheaper valuations could make
these areas good diversifiers to U.S. fixed income portfolios.
Ke y Take away
What to DO
With rising interest rates, bond
portfolio
principal is at risk.
BONDS
B
uy
ers
Bew
ar
e
Seek managers with flexibility
and security selection expertise.
W hat to k n ow , what to do
[11]

12. 9
Consider Munis for
Tax-Exempt Income
Municipal bonds
remain an attractive
source of income,
particularly on an
Detroit and Puerto Rico make for rousing headlines, but
they do not characterize the broader municipal market.
In our view, muni market fundamentals remain sound and municipal bonds
look attractive.
We believe current market levels for municipal bonds offer an opportunity
to reposition portfolios for the future. We find tax-exempt bonds, supported
by strong fundamentals, to be reasonably valued relative to taxable alternatives.
The onus of higher taxes should also bolster the asset class. Overall, munis
remain a high-quality, attractive option for investors focused on tax-advantaged
income and capital preservation.
after-tax basis.
What to DO
Ke y Take away
Look past the headlines—the finances
IG
H E R TA XE
S
AD
At
H
D M U NIS
The key for investors is to be selective.
Munis are still an attractive asset class—especially
at a time when many are paying higher taxes.
[12]
2 0 1 4 O u tlook : T he L ist
e
of municipalities in general are actually getting stronger.
tr
ac
ti v e In c
o
m

13. 10
Go Beyond Traditional
Stocks and Bonds
Volatility looks to be high and finding growth and income
are major challenges. But stocks are no longer cheap, neither bonds
nor cash offer compelling value, and all could be vulnerable to increases
in interest rates. That’s why we advise incorporating alternative strategies
that can help broaden your diversification, protect against rising rates and
contribute to growth. (Remember, however, that diversification does not
ensure profits or protect against loss.)
Question for
your portfolio:
What non-traditional
investment opportunities
should you consider?
Diversifying with alternatives means adding new asset classes such as
physical real estate and infrastructure investments. It also means finding
managers that have the flexibility to seek out income and returns across
a wide variety of investments. Additionally, you may want to consider new
strategies such as long/short approaches that can be employed with both
stocks and bonds to mitigate volatility, seek out returns and contribute
to diversification. While the risks of long/short strategies include the
possibility of losses larger than invested capital, we believe they can offer
a powerful differentiated source of return and the potential for more
consistent results over time.
Ke y Take away
What to DO
Use non-traditional
tools to diversify and smooth the ride.
Infrastructure
Long/Short Strategies
T raditio n a L
stocks
a nd B o nds
Flexible Investments
ad
if
Br
o
y
S EEK A
S M O O T HER
R ID E
en
& Div
er
s
Real Estate
Consider long/short strategies, infrastructure,
real estate, and flexible investments.
W hat to k n ow , what to do
[13]

14. Turning Insight Into
Investment Actions
With economic and market conditions slowly improving, but uncertainty
high and income and returns still tough to come by, we suggest you make
adjustments to your portfolio to take advantage of upside opportunities.
We would encourage you to work with your financial professional to seek
out new ways to grow your portfolio.
1 2 3
Investment actions for 2014
Rethink Your
Bonds
Generate Income,
But Don’t Overreach
Seek Growth,
Manage Volatility
} llocate to adaptable
A
strategies
} Take a flexible approach
to income
} eek returns beyond
S
traditional U.S. bonds
} Overweight credit
for yield
} Diversify into
unconstrained and
alternative strategies
} educe your interest
R
rate sensitivity
} dapt to higher taxes
A
} llocate to higher
A
growth opportunities
} anage volatility with
M
conservative equities
REL ATED RESOURCES
Squeezing Out More Juice
The latest publication from the BlackRock Investment Institute
provides a more in-depth discussion of the global trends that
may drive financial markets in the coming year.
BlackRock Investment Directions
BlackRock’s monthly asset allocation recommendations, with
a focus on ways to position your portfolio in the coming year.
[14]
2 0 1 4 O u tlook : T he L ist

15. About the authors
Russ Koesterich, Jeffrey Rosenberg and Peter Hayes are prolific commentators on
the markets, can regularly be seen on CNBC, Fox Business News and Bloomberg
TV, and are often quoted in the print media, including The Wall Street Journal,
USA Today and Barron’s.
Russ Koesterich
Jeffrey Rosenberg
Peter Hayes
Global Chief Investment
Strategist
Chief Investment Strategist
for Fixed Income
Head of BlackRock’s
Municipal Bonds Group
W hat to k n ow , what to do
[15]

16. Why BlackRock
As the world’s largest investment manager, we believe it’s our responsibility
to help investors of all sizes succeed in the New World of Investing. We were
built to provide the global market insight, breadth of capabilities, unbiased
investment advice and deep risk management expertise these times require.
The Resources You Need for a New World of Investing
Investing with BlackRock gives you access to every asset class, geography
and investment style, as well as extensive market intelligence and risk
analysis, to help build the dynamic, diverse portfolios these times require.
The Best Thinking You Need to Uncover Opportunity
With deep roots in all corners of the globe, our 100 investment teams in 30
countries share their best thinking to translate local insight into actionable
ideas that strive to deliver better, more consistent returns over time.
The Risk Management You Need to Invest With Clarity
With more than 1,000 risk professionals and premier risk management
technology, BlackRock digs deep into the data to understand the risk that has
to be managed for the returns our clients need and bring clarity to the most
daunting financial situations.
BlackRock. Investing for a New World.®
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 December 9, 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. 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.
FOR MORE INFORMATION: www.blackrock.com
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