Inflation will likely heat up in the coming months, but not to worrying levels.
Astute bond investors always keep an eye on inflation. After all, future coupon payments on fixed-rate bonds can lose purchasing power if the price of goods and services rises.
A commonly heard argument these days is that the extraordinary rescue measures taken by the Federal Reserve to help stabilize the economy and financial system in the wake of the pandemic will ultimately result in inflation exploding higher. We think that is unlikely to be the case.
We believe that last year’s broadly deflationary influences may well shift to somewhat higher rates of inflation by mid-2021, but we don’t think this will reach excessive levels. The fact is that demographic trends of population aging and disinflationary technological headwinds are both likely to keep generalized price increases moderate in the years to come.
To put it simply, we think that in the current economic environment, there is not enough demand growth to drive significantly escalating inflation for a persistent period of time and technology is helping to greatly increase supply.
The BlackRock Strategic Income Opportunities Fund posted a strong return for the month of December as risk assets rallied into year end. Exposures to U.S. high yield credit, structured products, emerging market debt and Asian credit drove the fund’s gains, while duration positioning (interest rate sensitivity) was a hindrance.
View fund commentary
Bob Miller
Head of the U.S. Multi-Sector Fixed Income
Rick Rieder
Chief Investment Officer of Global Fixed Income and Head of the Global Allocation Team
Performance data quoted represents past performance and is no guarantee of future results. Investment returns and principal values may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. All returns assume reinvestment of dividends and capital gains. Current performance may be lower or higher than that shown. Refer to blackrock.com for most recent month-end performance.
To obtain more information on the fund, including the Morningstar time period ratings and standardized average annual total returns as of the most recent calendar quarter and current month-end, please visit Strategic Income Opportunities Fund.
The Morningstar RatingTM for funds, or "star rating," is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
© BlackRock
Read more commentaries by BlackRock
