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FOR PUBLIC DISTRIBUTION IN THE U.S., CANADA, LATIN AMERICA, HONGKONG, SINGAPORE AND AUSTRALIA. FOR INSTITUTIONAL, PROFESSIONAL, QUALIFIED INVESTORS AND QUALIFIED CLIENTS IN OTHER PERMITTED COUNTRIES. Short over long Tactical views U.S. Treasury yields, 2000-2022 7% A new playbook 6% 5% Our 2023 playbook is ready to In equities, we believe recession isn’t d4% quickly adjust depending on how fully reflected in corporate earnings Yiel markets price economic damage expectations or valuations –and we 3% and our risk stance evolves. disagree with market assumptions We prefer short-term government that central banks will eventually 2% bonds for income: The jump in turn supportive with rate cuts. We yields reduces the need to take risk look to lean into sectoral 1% by seeking yield further out the opportunities from structural curve. U.S. two-year Treasury yields transitions –such as healthcare 0% have soared above 10-year yields. amid aging populations –as a way 2000 2005 2010 2015 2020 See the chart. We break out short- to add granularity even as we stay overall underweight.Among 10-year Two-year term Treasuries as a neutral. cyclicals, we prefer energy and We add to our overweight to financials. We see energy sector Chart takeaway: We see long-term yields rising further as term investment grade credit. Higher earnings easing from historically premium returns. Yet we expect less room for short-term yields to yields and strong balance sheets elevated levels yet holding up amid climb given the limited scope we see for a further jump in expected suggest to us investment grade tight energy supply. Higher interest policy rates. credit may be better placed than rates bode well for bank profitability. equities to weather recessions. We like healthcare given appealing Past performance is not a reliable indicator of current or future results. Source: BlackRock valuations and likely cashflow Investment Institute, with data from Refinitiv Datastream, November 2022. Notes: The chart We like U.S. agency mortgage- resilience during downturns. shows U.S. 10-year and two-year Treasury yields. backed securities (MBS) for their higher income and because they offer some credit protection via the government ownership of their A bottom-up look at what our issuers. And our expectation for companies are telling us is We expect views to change more persistent inflation relative to probably the best lens we have frequently than in the past. Our stance market pricing keeps us overweight inflation-linked bonds. into the future.” heading into 2023 is broadly risk-off, Long-term government bonds Carrie King with a preference for income over remain challenged as we have Global Deputy Chief described, so we stay underweight. Investment Officer, equities and long-term bonds. Blackrock Fundamental Equities 88 2023 outlook 8 2022 midyear outlook BBIIIIMM1122U/M1222U/M--26121472617935--88/16/16

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