With volatility hitting a two-month high in the past week, Russ Koesterich, Chief Investment Strategist at BlackRock, expects both equity and bond market volatility to continue in the weeks ahead. Looking forward, the rocky road is likely to continue in the near-term thanks to investor anxiety and uncertainty surrounding three issues, says Koesterich. These issues include (1) uncertainty surrounding the extent of the US economic recovery (2) uncertainty surrounding the timing and pace of the Fed's tapering of QE, and (3) growing geopolitical instability in the Middle East leading to higher energy prices. Koesterich provides two ideas for potentially insulating portfolios amid this volatility. Firstly, investors should seek international diversification as international stocks' cheaper valuations already reflect a fair degree of risk. Secondly, investors should consider an overweight position in energy companies as this will potentially act as a hedge against Middle-East induced market volatility. (VIEW LINK)
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