20th July 2012

BlackRock Q3 Outlook: UK Equities

Macro risk a key feature of markets in 2012; the environment remains uncertain

UK and European economies to remain weak; domestic consumption under pressure

Situation in Europe is both a short and long term crisis:

• today: funding and solvency of banking system; longer term: structural reform and fiscal union
• road map to stabilise banking system and move towards fiscal union; will require new institutions and treaties
• investor confidence will probably return once direction of policy is clearer

US still a major determinant of global growth

• data pointed to a strong start to year; recent data points indicate a slowdown
• further action by the Federal Reserve to boost economic growth?

Emerging Markets continue to be a significant driver of global economic growth

• scope for the Chinese authorities to facilitate a softer landing

Preference for high quality franchises that can prosper in a difficult environment

Continue to focus on stock selection:

• companies overlooked by the market, offer growth prospects and/or a measure of protection from macro risk factors
• strong balance sheets
• cash generative, “best of breed” industry leaders
• companies that possess a degree of self-help potential

Investments