Whether you are a regular saver, a lump sum investor/depositor, a worker building your pension fund for retirement, a stock investor, a property investor and possibly some or all of the above, Blackrock’s Investment outlook for 2014 entitled "Squeezing out more juice" is full of knowledge. It gives a deeper understanding of what factors are at play in the global recovery. It also sets out the 5 key players (US, Europe, Japan, China and UK); the actions they are taking, the key risks and uncertainties in play and the good and the bad news. It features three possible scenarios for 2014 with commentaries on the different asset classes for investors in equities, bonds and alternatives (including currencies, property and commodities) reinforcing the importance of diversification and how it acts as a form of insurance in the portfolio.

What I like most about this report is that in 16 pages, with useful charts and summaries, it brings together all of its strands and blends them well.

The Scenarios

The outlook is based around three themes of Growth, Markets and Risk and three B scenarios of a Base case, Bull case and Bear case and their expected probabilities:

  • Base Case - Low for Longer (55%)
  • Bull Case – Growth Breakout (25%)
  • Bear Case – Imbalances Tip Over (20%)

Blackrock sticks it’s neck out making their most likely prediction that global recovery will continue on a ‘Low for Longer’ basis. By this they mean a slow global recovery with continued low interest rates, low economic growth rates and possible deflation for up to another three years.

They hedge their bets by offering two other scenarios, one which is positive and one negative with a 20% chance of things getting worse.

The Players/Actions

The best part of the report, is explaining how the key players act during these tough times. It refers to the US Fed pumping money into the system to combat the deflation and recession. It cites the new phenomenon of ‘Abenomics’ in Japan which has led to 41% growth there in last 12 months. China too after heightened political uncertainty in mid-2013, they appear now to be once again in control and setting up new policy reform particularly around the financial and property sectors. The ECB have lowered rates even further to record lows, while UK/Bank of England is showing very positive signs with good GDP growth and could be the first to experience the ‘Growth Breakout’. If the latter is true of our nearest neighbour, this could be invaluable knowledge for the investor.

At each report section, they have charts and tables for ease of understanding and they show their preferred assets within each of the regions.

From a portfolio point of view, this is the kind of qualitative information investors need to help in the selection process.

The overall message within the report is of continued low rates which is bad news for depositors. Those of us with longer term investment horizons and a tolerance for higher risk will find lots of good ideas and logic within the report for investment fund selection in terms of industry sector, geographic region and asset class.

There are too many good reasons to go into about why you should check this report out. The link is attached which will bring you to the summary page. Read it to whet the appetite, print it or bookmark it if time is against you and go back at a suitable time and read the 16 page report. It’s compelling reading for all investors and whether you agree or disagree with

Squeezing out more juice

its content, it can help shape your investment decisions for the better in the year ahead.