Investment moves for 2019 Chris Dhanraj Head, U.S. iShares Investment Strategy

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Agenda

• Macroeconomic context: The “R word” and how we feel about it • 2018 in review

• Key investment themes for 2019

• Asset class views: Where we are heading and the importance of quality

• Overall themes

• Fixed income preferences

• Equity preferences

• Actionable Ideas

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Macroeconomic Update

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Asset performance, 1M and 2018 returns

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Source: BlackRock Investment Institute, with data from Thomson Reuters, January 2019. Notes: Data are through January 2019. The dots show total returns of asset classes in local currencies. Exceptions are commodities and emerging equities, which are denominated in the U.S. dollar. Indexes or prices used are: Brent crude spot, DXY Index, MSCI World Momentum Index, MSCI USA Index, MSCI World Min Vol Index, Bank of America Merrill Lynch Global Bond Corporate Index, DataStream 10-Year Benchmark Government Bond (Italy, U.S.) Indexes, MSCI EM Lat Am Index, JP Morgan EMBI Global Composite Index, MSCI Europe Index, MSCI Japan Index and MSCI EM Index.

2018 was a very unusual year with few places to hide Our base case sees moderate positive returns across asset classes in 2019

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Brent Crude

Japanese equities

Emerging market equities

European equities

EM Lat Am equities

$ Emerging Market Debt

U.S. equities

Global corporate investment grade

DM momentum equities

Italian 10-Year BTPs

DM min vol equities

U.S. 10-Year Treasury

U.S. Dollar Index

RETURN (%)

2018 range 2018 1M

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Key investment themes for 2019

GROWTH SLOWDOWN BALANCING RISK AND REWARD

Barbell allocations to quality assets with risk-taking in assets

with right-hand tails

Economic and earnings growth set to slow in 2019

NEARING NEUTRAL

Rising U.S. short rates are tightening global financial

conditions

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Sources: BlackRock Investment Institute, with data from Bloomberg, January 2019. Notes: The BlackRock Growth GPS shows where the 12-month forward consensus GDP forecast may stand in three months’ time.

BlackRock Growth GPS for the U.S., Eurozone, and Japan, 2010–2019

Sources: BlackRock Investment Institute, with data from Thomson Reuters, December 2018. Notes: The chart shows the estimated probability of a U.S. recession over the following four quarters. Actual U.S. recessions as defined by the U.S. National Bureau of Economic Research are denoted by the shaded areas. The estimation is done via a series of quartile regressions that estimate the probability that growth will be below or above certain thresholds. For illustrative purpose only. There is no guarantee that any forecast made will come to pass.

BlackRock’s estimate of forward-looking U.S. recession probability, 1985–2020

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20%

40%

60%

80%

1985 1990 1995 2000 2005 2010 2015 2020FO

UR

-QU

AR

TER

AH

EA

D R

EC

ES

SIO

N P

RO

BA

BIL

ITY

Recession Recession probability

54%

38%

19%

2021

2020

2019Risk of recession by:

2.8

1.4

1.1

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

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AL

GD

P G

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US Eurozone Japan

1. Growth slowdown: economic growth is slowing down globally as the U.S. enters late-cycle

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Economic cycles across five decades

Federal Reserve estimate of the U.S. output gap, 1965-2018

Q3 2018

-8

-6

-4

-2

0

2

4

6

65 68 71 74 77 80 83 86 89 92 95 98 01 04 07 10 13 16

U.S

. OU

TPU

T G

AP

(%)

U.S. Recession Recession Early Mid LateForward-looking estimates may not come to pass. Sources: BlackRock Investment Institute with data from the Federal Reserve and Thomson Reuters, October 2018. Notes: the chart shows the U.S. output gap as estimated by the Board of Governors of the Federal Reserve. Economic cycles are categorised into early, mid, late and recession stages, based on a statistical technique called cluster analysis. This technique looks at economic variables that have behaved in similar patterns at different points of the cycle and uses these patterns to identify the different stages.

What do we mean by late-cycle?

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Earnings expectations are following suit

Source: BlackRock Investment Institute with data from Thomson Reuters, January 2019. Notes: the lines show the 3-month average of the number of upgrades to 12m forward earnings estimates, divided by the number of downgrades, over the past one month.

DM and EM earnings revision ratios, 2015-2019

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Forward-looking estimates may not come to pass. Sources: BlackRock Investment Institute with data from Bloomberg, January 2019. Notes: The G7 Growth GPS shows where the 12-month forward consensus GDP forecast may stand in three months’ time. The forward earnings lines shows the YoY change in 12-month forward earnings for MSCI World Index and MSCI Emerging Markets Index, measured in USD.

BlackRock G7 Growth GPS and global earnings growth, 2015-2019

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30

1.5

1.75

2

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2.5

2014 2015 2016 2017 201812-M

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OW

TH (%

)

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DP

GR

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TH (%

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G7 Growth GPS

MSCI World 12-month forward earnings (RHS)

MSCI EM 12-month forward earnings (RHS)

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MSCI DM MSCI EM

More upgrades than downgrades

More downgrades than upgrades

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48

50

52

54

2015 2016 2017 2018

PM

I IN

DE

X LE

VE

L Chinese growth should hold up in the near-term

Sources: BlackRock Investment Institute, with data from Thomson Reuters, December 2018. Notes: SAAR 6mma is a six-month moving average of the seasonally adjusted annual rate.

China broad credit growth as % of GDP, 2011-2018

Forward-looking estimates may not come to pass. Source: BlackRock Investment Institute, with data as of November 2018 from Consensus Economics, an international organization that polls more than 700 economists globally to obtain their forecasts across various macroeconomic indicators. Notes: The lines show the distribution of two-year forward GDP forecasts as of November 2018 and 2017. The vertical axis shows the relative frequency of each forecast.

Distribution of two-year forward GDP forecasts, 2018 vs. 2017

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Broad Credit Flow as % of GDP SAAR 6mma

China Current PMI

China GPS

Future China Caixin PMI implied by BlackRock Macro GPS vs. current, 2015-2018

Forward-looking estimates may not come to pass. Sources: BlackRock Investment Institute with data from Markit, December 2018. Notes: The GPS shows where the Caixin composite PMI may stand in three months' time. The blue line shows the current PMI level. PMI stands for Purchasing Managers Index.

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China GDP Growth (%)

Nov 2017 (2019 forecast)

Nov 2018 (2020 forecast)

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2015 2016 2017 2018 2019

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CEN

T

U.S. FCI Eurozone FCI Japan FCI

Sources: BlackRock Investment Institute, Federal Reserve and National Bureau of Economic Research, with data from Thomson Reuters, December 2018. Notes: The chart shows U.S. policy rates with our estimate of the long-term neutral rate. The neutral rate is estimated based on an econometric model from the July 2018 ECB working paper “The natural rate of interest and the financial cycle.” This model takes into account financial cycle dynamics.

U.S. policy rate and neutral rate estimate, 1990-2018

There is no guarantee any forecasts made will come to pass. Sources: BlackRock Investment Institute, with data from Bloomberg, January 2019. The chart shows our financial conditions indicator (FCI) for the US, eurozone and Japan. An increase in the FCI reflects an easing of financial conditions and a decline reflects a tightening in conditions. The FCI inputs include policy rates, bond yields, corporate bond spreads, equity market valuations and exchange rates.

U.S., eurozone and Japan FCI, 2015-2019

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6

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1990 1995 2000 2005 2010 2015R

ATE

(%)

Recession Fed policy rate Long-term neutral rate

~100 bp gap

2. Nearing neutral: We expect the Fed to become more data dependent as financial conditions tighten and rates approach neutral

Tighter financial conditions

Easier financial conditions

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Minimal central bank action is expected in 2019

There is no guarantee that any forecast made will come to pass. Source: BlackRock Investment Institute with data from Bloomberg, January 2019. Notes: The charts shows the market-implied policy rate for the European Central Bank based on short-term interest rate swaps.

Forward-looking market pricing for ECB interest rate moves, 2019-2021

There is no guarantee that any forecast made will come to pass. Source: BlackRock Investment Institute with data from Bloomberg, January 2019. Notes: The chart shows the amount of U.S. interest rate hikes or cuts priced by the market for 2019. Market pricing is based on the spread between Eurodollar futures for Dec. 18 and Dec. 19. After 12th December, the chart shows the spread between Jan. 19 and Dec. 19 Eurodollar futures.

U.S. interest rate moves priced by the market for 2019

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Jan 2019 Jan 2020 Jan 202

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4

8

12

16

U.S.stocks

U.S.Treasuries

60/40portfolio

U.S.stocks

U.S.Treasuries

60/40portfolio

AV

ER

AG

E R

ETU

RN

(%)

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Sources: BlackRock Investment Institute with data from Thomson Reuters, January 2019. Notes: the line shows the 1-year rolling correlation based on daily returns of the MSCI USA Index and Thomson Reuters 10-year U.S. government bond benchmark index. The dot shows the same correlation but over the last 90 days only.

U.S. equity / bond correlations, 2010-2019

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Sources: BlackRock Investment Institute, with data from Bloomberg and NBER, December 2018. Notes: The bars show the average returns across asset classes in periods before U.S. recessions, from 1978-2018. The left-hand bars show the average returns in calendar years before a year a recession started. The right-hand bars show the average return in the four quarters preceding the quarter in which a recession started. Recessions are as defined by NBER, with five recessions over the 40-year period. U.S. stocks are represented by the S&P 500 Index, Global stocks by the MSCI World Index, U.S. Treasuries by the Bloomberg Barclays U.S. Treasury Total Return Index. 60/40 refers to a hypothetical portfolio of 60% S&P 500 and 40% Bloomberg Barclays U.S. Treasury Total Return Index, weighted monthly. Equities reflect price returns and bonds total returns, all in U.S. dollars.

Average 12-month returns in periods preceding U.S. recessions, 1978-2018

Calendar year preceding recession

Four quarters preceding recession

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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

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) Long-term correlation Last 90 days

3. Balancing risk and reward: emphasis on quality assets and targeted risk-taking in areas that may offer attractive compensation for risk

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Rolling with the Shorts

Ratio of two- to 10-year U.S. bond yields, 2010-2018

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Sources: BlackRock Investment Institute, with data from Thomson Reuters, November 2018. Notes: The green line shows the yield of two-year U.S. government bonds as a percentage of the yield of 10-year U.S. government bonds based on Thomson Reuters benchmark indexes. The blue line shows the equivalent metric for Bloomberg Barclays 1-3 year U.S. investment grade credit index relative to the 10-year + equivalent index.

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2010 2012 2014 2016 2018

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U.S. government bonds U.S. investment grade credit

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Adding to ballast: Treasuries may offer protection during periods of volatility

U.S. government bonds and MSCI World, 2018-2019

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Sources: BlackRock Investment Institute, with data from Bloomberg, January 2019. Notes: Both indexes rebased to 100 at Jan. 1, 2018.

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Bloomberg Barclays US Treasury Total Return USD Index (LHS) MSCI World USD Index (RHS)

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The upward pressure on valuations that we saw in 2018 should ease this year

Asset yields, Jan 2019 vs. post-crisis average and start of 2018

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Source: BlackRock Investment Institute, with data from Thomson Reuters, December 2018. Notes: The post-crisis average is measured from 2009 through 2018. Equity market yields are represented by 12-month forward earnings yields. Indexes used from left to right are: Thomson Reuters DataStream 2-year and 10-year U.S. Government Benchmark Indexes, Bloomberg Barclays U.S. Credit Index, Bloomberg Barclays U.S. High Yield Index, JP Morgan EMBI Global Diversified Index, MSCI World Index and MSCI Emerging Markets Index.

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U.S. 2-yearTreasury

U.S. 10-yearTreasury

U.S. IG Credit U.S. HY Credit $ EMD DM Equity EM Equity

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D (%

)

Post-crisis average Current Start of 2018

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Identifying right tail risks: We are overweight EM and U.S. equities

Source: BlackRock Investment Institute with data from Thomson Reuters, January 2019. Notes: The lines show 12-month forward earnings for MSCI USA, MSCI Europe, MSCI UK and MSCI Emerging Markets. rebased to 100 at the start of 2010.

Emerging and developed market equity valuations, 1990–2019

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Sources: BlackRock Investment Institute, with data from Thomson Reuters, January 2019. Notes: The lines in the first chart show the 12-month forward price-to-earnings ratios for the MSCI World Index (representing developed markets, or DM) and MSCI Emerging Markets Index (representing emerging markets, or EM).

12-month forward earnings across regions, 2010-2019

Annual change in U.S. stock multiples, 1988-2018

Source: BlackRock Investment Institute with data from Thomson Reuters, January 2019. Notes: the bars show the annual percentage change in the 12-month forward price-to-earnings ratio for MSCI USA.

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1990 1995 2000 2005 2010 2015

P/E

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DM EM DM Average EM Average

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U.S. Europe UK EM

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The U.S. earnings estimates look more realistic than international peers

Annual earnings estimate trends since 2008 vs. current 2019 estimates

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Sources: BlackRock Investment Institute, with data from Thomson Reuters and IBES, January 2019. Notes: The line shows the average annual earnings growth estimate progression throughout the calendar year, from 2008 to 2017. 2018 is still in progress so it is not included in the analysis. Indexes used are the MSCI USA Index and MSCI World Ex-US Index.

Avg. revision: -2.21

Avg. revision: -6.94

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2019E (%)

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Sector performance and market cycles

Sector excess returns vs S&P 500 across the market cycle stages, (12/31/1988 – 10/31/2018)

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Source: BlackRock Investment Institute with data from Bloomberg, Thomson Reuters, as of October 31, 2018. Performance represented is that of the S&P 500 Level 1 GICS Sector Indexes less the performance of the S&P 500 Index, over four different stages of the economic cycle. We break down these stages of the cycle based on leading economic indicators.

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Recession Early Cycle Mid Cycle Late Cycle

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Healthcare: Defensive characteristics

Max drawdown 2008-2018 (LHS), correlation to 10 year yield monthly change (RHS)

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Max drawdown (2008 - 2018) Correlation to 10yr yield monthly change

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Source: data from Thomson Reuters, October 2018. Performance represented is that of the S&P 500 Level 1 GICS Sectors 2008-2018. * Max drawdown is defined as the largest drop from a peak to a bottom over a given time frame. In this case it was calculated using monthly returns over the past 10 years.

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Healthcare: Secular drivers

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USA Europe China Japan

Source: United Nations, Department of Economic and Social Affairs, Population Division (2017). World Population Prospects: The 2017 Revision, DVD Edition. Forecasts may not come to pass.

[VALUE]

$4,000

$7,000

$10,000

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$16,000

$19,000

Per C

apita

Am

ount

Other Healthcare Spending

19.9% of U.S. GDP by 2025

*Source: U.S. Department of Health and Human Services and Centers for Medicare & Medicaid Services, Office of Actuary: "National Health Care Expenditure Projections: 2016–2025”. Forecasts may not come to pass. All figures shown in USD.

Percent of Population +65 years Projected healthcare spending per capita*

Healthcare spending as a percentage of GDP*

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Healthcare: Earnings growth and reasonable valuations

Source: Bloomberg, as of January 18, 2019. Based on the forward price to earnings ratios of the S&P 500 Healthcare Index relative to the S&P 500 Index. Forward earnings calculated based on Bloomberg estimates.

Forward P/E Ratio – Healthcare vs S&P 500 (3/31/1990 to 1/18/2019)

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Source: Bloomberg, as of January 18 2019. Earnings depicted are the 12 month trailing earnings per share of the S&P 500 Health Care Sector and the S&P 500 Index, since January 1, 1996.

Trailing 12 month EPS (Rebased to 100, 1/31/1994 to 1/18/2019)

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S&P 500 Healthcare Sector S&P 500 Index

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S&P 500 Healthcare Index vs S&P 500 Index - ForwardPE

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OPEC cuts should help to stabilise prices, but fears of U.S. shale production have made the OPEC move less effective than compared to history

Oil prices around OPEC production cuts, 2016-2018

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Past performance does not guarantee future results. Sources: BlackRock Investment Institute, with data from Thomson Reuters, as of January 2019. Notes: The chart shows the cumulative Brent oil performance starting from 60 trading days before the four realized OPEC cut announcement dates: November 30, 2016 (OPEC 1st Cut), May 25, 2017 (OPEC Cut Extension), November 30, 2017 (OPEC Cut 2nd Extension) and December 6, 2018 (OPEC Cut New).

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The rise in the U.S. dollar has slowed - short positions have now unwound

Sources: BlackRock Investment Institute, with data from Bloomberg, CFTC, EPFR and State Street, January 2019. Notes: The data are based on BlackRock’s analysis of portfolio flows, fund manager positions and price momentum. The EM FX analysis excludes portfolio flows. A positive score means investors are overweight the asset class; a negative score indicates an underweight.

BlackRock RQA Crowded Positioning for USD and EM FX, 2016-2019

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Source: BlackRock Investment Institute, with data from Thomson Reuters, January 2019. Represented above are the spot prices of USD vs Japanese yen, euro, UK pound and the JP Morgan EM Currency Index.

USD vs. JPY, EUR and EM FX, 2017-2019

Crowded long

Crowded short

USD strengthening

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USD vs. JPY USD vs. EUR

USD vs. EM FX USD vs. GBP

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Tactical asset class views

Overweight U.S. and EM given stronger conviction in earnings outlook Prefer quality-style equities with strong balance sheets and sustainable free cash flow Neutral on Japan with no clear catalyst for outperformance Underweight Europe given weaker growth and political risks

Neutral on U.S. Treasuries Neutral on U.S. and European credit, prefer to take economic risk in equities Neutral on EMD, favour hard currency over local currency Underweight European sovereigns, prefer European core

Source: BlackRock Investment Institute. Views are as of January 2019 and are subject to change at any time due to changes in market or economic conditions.

Equities

Fixed income

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Actionable Ideas

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Duration may be your (portfolio’s) friend again

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Sources: BlackRock Investment Institute with data from Thomson Reuters, January 2019. Notes: the line shows the 1-year rolling correlation based on daily returns of the MSCI USA Index and Thomson Reuters 10-year U.S. government bond benchmark index. The dot shows the same correlation but over the last 90 days only.

Bonds are back U.S. equity / bond correlations, 2010-2019

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Source: BlackRock Investment Institute with data from Thomson Reuters Datastream and Bloomberg Barclays Indices as of Jan 28, 2019. All Indices quoted above are the Bloomberg Barclays Indices for each asset class.

ADMASTER-STAMP!ICR1118U-645852-2007341

Focus on credit quality despite the rally Year to date total return (%)

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US TreasuryUS Agency

Mortgage BackedAsset BackedUS Aggregate

CMBSUS Muni

Global TreasuryGlobal Aggregate

US CreditUS Corp. Financials

Global EmergingGlobal High Yield

US Corp. High Yield

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Pursue quality stocks late in the cycle

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Source: BlackRock Investment Institute with data from Bloomberg, Thomson Reuters, as of October 31, 2018. Performance represented is that of the S&P 500 Level 1 GICS Sector Indexes less the performance of the S&P 500 Index, over four different stages of the economic cycle. We break down these stages of the cycle based on leading economic indicators.

Traditional defensive attributes Sector excess returns vs S&P 500 across market cycle

stages, (12/31/1988 – 10/31/2018)

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Source: Bloomberg, as of January 18 2019. Earnings depicted are the 12 month trailing earnings per share of the S&P 500 Health Care Sector and the S&P 500 Index, since January 1, 1996.

ADMASTER-STAMP!ICR1118U-645852-2007341

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Recession Early Cycle Mid Cycle Late Cycle

Resilient earnings growth Trailing 12 month EPS (Rebased to 100, 1/31/1994 to

1/18/2019)

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S&P 500 Healthcare Sector S&P 500 Index

ICRMH0219U-73667-1/27

Use industries to better target ideas

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Index performance does not represent actual iShares Fund performance. For actual fund performance, please visit www.iShares.com or www.blackrock.com. Sources: BlackRock, Bloomberg, January 18, 2019. Performance depicted is that of the Dow Jones U.S. Select Medical Equipment Total Return Index, the Dow Jones U.S. Select Health Care Providers Total Return Index, the Dow Jones U.S. Select Pharmaceuticals Total Return Index and the NASDAQ Biotechnology Total Return Index minus the return of the Dow Jones U.S. Health Care Total Return Index.

Industry dispersion in focus 1 year performance relative to broad U.S. healthcare sector (%)

ADMASTER-STAMP!ICR1118U-645852-2007341

-20

-15

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-5

0

5

10

15

Out

perfo

rman

ce /

Und

erpe

rform

ance

(%)

NASDAQ Biotechnology Total Return IndexDow Jones U.S. Select Medical Equipment Total Return IndexDow Jones U.S. Select Health Care Providers Total Return IndexDow Jones U.S. Select Pharmaceuticals Total Return Index

ICRMH0219U-73667-1/28

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any of these views will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

This material is provided for educational purposes only and is not intended to constitute investment advice or an investment recommendation within the meaning of federal, state or local law. You are solely responsible for evaluating and acting upon the education and information contained in this material. BlackRock will not be liable for direct or incidental loss resulting from applying any of the information obtained from these materials or from any other source mentioned. BlackRock does not render any legal, tax or accounting advice and the education and information contained in this material should not be construed as such. Please consult with a qualified professional for these types of advice.

The information included in this material has been taken from trade and other sources considered to be reliable. We do not represent that this information is accurate and complete, and it should not be relied upon as such. Any opinions expressed in this material reflect our analysis at this date and are subject to change. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, but are not guaranteed as to accuracy.

This document contains general information only and does not take into account an individual's financial circumstances. This information should not be relied upon as a primary basis for an investment decision. Rather, an assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a financial advisor before making an investment decision.

International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/developing markets and in concentrations of single countries.

Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments.

©2019 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries. All other marks are the property of their respective owners. The information provided in this communication is solely for educational purposes and should not be construed as advice or an investment recommendation. Fidelity Investments is a separate company, unaffiliated with BlackRock, Inc.. There is no form of partnership, agency affiliation, or similar relationship between BlackRock, Inc. and Fidelity Investments, nor is such a relationship created or implied by the information herein. Fidelity Investments has not been involved with the preparation of the content supplied by BlackRock, Inc. and does not guarantee or assume any responsibility for its accuracy or completeness.

Important information

ICRMH0219U-73667-1/29

U.S. iSHARES INVESTMENT STRATEGY

iShares.com

Investment directionsSpring forward

SPRING 2019

Once again, spring is near, a time of growth, renewal and restoration. But with concerns over slowing growth, uncertainty around economic and earnings outlooks, and ever-present U.S.-China and European political risks, investors should be prepared for potential spring storms and begin to consider defensive exposures. Our take on the major themes for this quarter:

U.S. equities: The healthy healthcare sectorIn an environment of slowing growth and less certain earnings outlooks, the traditional defensive qualities and resilient earnings growth of healthcare stocks are appealing. Plus, valuations broadly look reasonable compared to historical levels. Tactical investors may consider getting more granular with the medical devices industry.

Developed markets: What next for Brexit?With Theresa May’s Brexit plan resoundingly defeated, she must now renegotiate a deal. We believe the United Kingdom is likely to avoid a hard exit with an extension of the March 29 deadline to exit and gain time to draft a passable proposal. But lingering uncertainty is likely to keep U.K. assets under pressure while a deeper slowdown in European and global growth only accentuates the challenges. We remain underweight U.K. and European equities.

Emerging markets: After a bad year, China looking aheadAlthough Chinese equities tumbled in 2018, we continue to favor China as well as emerging markets overall. Although trade tensions are likely to persist, we believe frictions will subside in the short run. And we find trade tensions are reasonably priced into Chinese equities. Meanwhile, accommodative policy measures and sustained earnings growth in China could lift investor sentiment.

Fixed income: Ballast mattersIn 2018, investors were rightly concerned about duration risk as interest rates rose due to Fed tightening, inflation fears and rising deficits. But during December’s equity sell-off, yields fell—long-duration U.S. Treasuries (as measured by the ICE U.S. Treasury 20+ Year Index) returned +5.6%—a stark reminder of the key role bonds can play as a diversifier in a portfolio. We favor holding long-duration Treasuries and highly rated investment grade bonds for this purpose.

Factors: Momentum on defense, divergence in qualityOur outlook for momentum has declined to a moderate overweight; it remains attractive, but its relative strength has markedly weakened from the strong levels seen since fourth quarter 2016. Our outlook for minimum volatility has improved from moderately underweight to moderately overweight this quarter and we have downgraded quality from moderately overweight back to neutral. We remain neutral on value, and underweight size.

Chris Dhanraj Head, U.S. iShares

Investment Strategy

Contributors Grant Dechert

Jasmine Fan

Elizabeth Grenfell

Thomas Logan

Dhruv Nagrath

Stephen Laipply Head of U.S. Fixed Income iShares

Product Strategy

Patrick Nolan Portfolio Strategist with the

BlackRock Portfolio Solutions Team

Sara Shores Head of Investment Strategy for

the Factor-Based Strategy Group

Editor David Kurapka

ICRMH0219U-729545-1/12

2 BLACKROCK INVESTMENT DIRECTIONS

Overview We continue to prefer the healthcare sector within U.S. equities. Within the sector, the medical devices industry bears watching.

U.S. equitiesThe healthy healthcare sector

Key points • The healthcare sector has had a healthy start to 2019. The sectoroutperformed the rest of the market during December’s volatility.

• We favor healthcare stocks. In an environment of slowing growthand less certain earnings outlooks, their traditional defensive qualities

and resilient earnings growth are appealing. Broadly, valuations lookreasonable compared to historical levels.

• Medical devices is a key industry to watch. Its considerablemomentum, exposure to innovation and significant ETF investorflows are noteworthy. Tactical investors may consider getting moregranular with their exposures.

Market pulseThe prospect of a U.S. Federal Reserve on hold from increasing interest rates, along with potential easing of trade tensions, has led U.S. equities to one of their brightest starts in 20 years. Even so, we consider that a focus on late-cycle portfolio resilience—without giving up on seeking gains completely—is warranted. Healthcare stocks appear to fit the bill.

The sector has had the lowest maximum drawdown in the post-crisis expansion of all sectors, and the lowest rate sensitivity among defensives.1 Meanwhile, healthcare’s earnings growth since the early 1990s has outpaced the broad market and been remarkably resilient; demographics and breakthroughs have helped power it through economic downturns (See Figure 1).

Figure 1: Relative value: Trailing 12-month earnings per share (EPS) Rebased to 100, January 31, 1994 to January 18, 2019

1000

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0

2002 2006 2010 2014 201819981994

1400

S&P 500 Index

S&P 500 healthcare sectorEPS

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Index performance does not represent actual iShares fund performance. For actual fund performance, please visit www.iShares.com or www.blackrock.com. Source: Bloomberg, as of January 18, 2019. Earnings depicted are the 12-month trailing earnings per share of the S&P 500 healthcare sector and the S&P 500 Index, since January 1, 1994.

1 Source: BlackRock Investment Institute with data from Thomson Reuters, as of October 2018, based on analysis of the max drawdown of the S&P 500 Level 1 GICS sectors between 2008-2018, and their correlation to monthly changes in the 10-year U.S. Treasury yield.

ICRMH0219U-729545-2/12

SPRING 2019 3

Valuations appear reasonable: The S&P 500 Index healthcare sector currently trades at a slight discount to the S&P 500 Index, lower than the historical average 9% premium for the sector (See Figure 2).

Figure 2: Forward P/E Ratio – S&P 500 healthcare sector vs. S&P 500 Index March 31, 1990 to January 18, 2019

60%

40

20

-40Prem

ium

/dis

coun

t (%

)

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0

2002 2006 2010 2014 2018199819941990

Historical average (since 3/31/90)9%

-2%

S&P 500 Index healthcare sector vs.S&P 500 Index - Forward PE

Source: Bloomberg, as of January 18, 2019. Based on the forward price-to-earnings ratios of the S&P 500 Index healthcare sector relative to the S&P 500 Index. The ratio is calculated by dividing the current price by forward earnings. Forward earnings calculated based on Bloomberg estimates. Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Index performance does not represent actual iShares fund performance. For actual fund performance, please visit www.iShares.com or www.blackrock.com.

Tactical investors may consider a more targeted approach: Medical devices outperformed the broad sector by 10% over the past year, aided by tax savings, R&D spending driving innovation and international demand—more than 40% of the revenues of companies in the Dow Jones U.S. Select Medical Equipment Index come from overseas.2

A tale of flowsRisk-off sentiment toward the end of 2018 catalyzed a divergence in performance between cyclical and defensive sectors. This divergence was also apparent in ETP flows, where defensive sectors saw $12.7 billion of net inflows compared to $17.8 billion of outflows from cyclical U.S. sector ETPs (Source: Markit, BlackRock, as of January 22, 2019).

Within defensive sectors, healthcare was able to gather the most attention. Healthcare sector-focused ETPs attracted $6.2 billion of inflows in 2018 (Source: Markit, BlackRock). Looking under the hood, there was a clear investor preference for broad healthcare and equipment and services healthcare products over the historically more volatile biotech- and pharmaceutical-focused funds. This trend has continued in 2019.

Figure 3: 2018 ETP flows into healthcare sectors 6000

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Healthcare equipment and services

Biotechand pharma

Broadhealthcare

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■ 2018 ● 2019●

●

●

Source: Markit, BlackRock, as of January 22, 2019.

2 Source: BlackRock Aladdin, as of December 31, 2018.

ICRMH0219U-729545-3/12

4 BLACKROCK INVESTMENT DIRECTIONS

Overview With regards to Brexit, the only certainty is uncertainty at this point. We remain underweight both U.K. and European equities.

Developed market equitiesBrexit: What next?

Key points • In January, Theresa May’s Brexit plan was resoundingly defeated.May then survived a no confidence vote but must now contend withthe opposition and renegotiate a deal.

• Market reaction has been muted to positive. U.K. equitieshave moved in tandem with EU equities while the British poundstrengthened, likely reflecting the lower probability that a worst-case,no-deal exit will materialize.

• We remain underweight both U.K. and European equities. The marketis now looking for the March 29 Brexit deadline to be extended, anoption that has received EU and U.K. support. It seems even the non-worst case scenarios call for continued uncertainty.

Market pulseConservative party members joined the opposition to reject Theresa May’s EU withdrawal agreement resoundingly by 432 to 202 on January 15. May’s government then survived a no confidence vote by 325 to 306.The only issue where a sufficient majority in Parliament exists is beingagainst a no-deal Brexit (i.e., hard Brexit). That has led many, includingGermany, France and even some pro-Brexit U.K. parliament members, tocall for an extension of the March 29 exit deadline to avoid a worst-case,no-deal outcome.

U.K. assets have not sold off despite the uncertainty, suggesting a meaningful risk premium is already in place. U.K. equities have moved in tandem with European equities while the British pound has strengthened. In our view, this reflects lower expectations for left-tail risk outcomes—diminishing risks—rather than an outright improvement in the economic outlook.

Political developments ahead of March 29 are critical. February 26 is the proposed deadline for the United Kingdom to extend Article 50. An EU withdrawal bill would then need to be formalized by U.K. and EU parties, followed by trade talks. No matter the outcome, Brexit uncertainty will loom large for some time.

Our base case sees the United Kingdom avoiding a no-deal Brexit, with an extension of the March 29 deadline giving much-needed time to draft a passable exit proposal. But we expect lingering uncertainty to keep U.K. assets under pressure, while a deeper slowdown in European and global growth only accentuates the issues. We remain underweight U.K. and European equities.

ICRMH0219U-729545-4/12

SPRING 2019 5

Figure 4: Underlying labor data has held up well amid Brexit uncertainty

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6/17 12/17 6/18 12/1812/166/1612/15

Average weekly earnings (3m moving average YoY %)

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Source: Thomson Reuters, as of January 24, 2019.

Figure 5: Sterling appreciation may bode well for U.K. small caps over large caps

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. small cap

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7/18 9/18 11/18 1/195/183/181/18

U.K. small cap / large cap relative performance

U.S. $ to U.K. £ (WMR) - Exchange rate

Source: Thomson Reuters, as of January 24, 2019. Based on the MSCI UK Small Cap and MSCI UK Large Cap Indexes. Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

A tale of flowsGlobal ETP flows into U.K. equities have been supportive over the past three months, particularly against the backdrop of large equity outflows from U.S. equities over the same time. Still, these recent inflows fail to account for the sizeable de-risking and shift away from U.K. equities witnessed in March 2018. We expect continued uncertainty to weigh on risk appetite and asset valuations, and keep inflows muted; however, the tepid inflows since March do suggest that market positioning reflects these risks, making any favorable upside surprises—unlikely as they may be—a catalyst that could lead investors to re-establish positions in U.K. equities.

Figure 6: Impact of uncertainty: Monthly U.K. ETP flows 2018-2019

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Source: Markit, BlackRock, as of January 22, 2019.

ICRMH0219U-729545-5/12

6 BLACKROCK INVESTMENT DIRECTIONS

Overview The sell-off in emerging markets this year has rattled investors. In China, the economic backdrop is encouraging, with near-term resilience and solid corporate earnings. Overall, we remain overweight EM equities, with a preference for EM Asia.

Emerging marketsChina: Looking ahead after a rough 2018

Key points • We continue to favor China and emerging markets overall. AlthoughChinese equities tumbled in 2018, we view the current risk/returnprofile as quite attractive.

• Easing trade frictions. Tensions are likely to persist, but we seefrictions subsiding in the short run. And we find trade tensions arereasonably priced into Chinese equities.

• Looking at policy and earnings. Accommodative policy measuresand sustained earnings growth in China could lift investor sentiment.

Market pulseThe year 2018 was a rough one for China’s financial markets. Rattled by an aggressive campaign against high leverage and rising trade frictions with the United States, Chinese equities plunged 18.8%, based on the MSCI China Index as of December 31, 2018, recording one of their worst performances in years. Recent negative surprises in China’s macro data highlighted the impact of tariffs on both exports and imports, adding to broader anxiety about a global growth slowdown.

The United States has imposed 10% to 25% tariffs on a total of $250 billion of imports from China and has implemented new rules to restrict China’s overseas investments in sensitive U.S. industries such as semiconductors and aircraft (Source: Bloomberg). Last December, however, the United States and China agreed to put further tariff hikes on hold for 90 days while resuming negotiations, offering some respite from a year marked by escalating trade tensions.

While tensions are likely to persist, we see room for frictions to subside in the short run. Both sides have incentives not to escalate the conflict and December’s market volatility in the United States has led to wider recognition that trade tensions could hurt domestic business confidence and employment. And Chinese leaders have promised to take targeted measures, such as increasing U.S. soybean imports, in order to mitigate potential trade conflicts.

Progress made on trade—both reducing trade barriers and increasing intellectual property protection—could lead to potential upside surprises in 2019 and may boost Chinese equities. Moreover, with leverage and overcapacity reduced, we see potentially more accommodative measures from Chinese policymakers that could stabilize the economy and support investor sentiment.

ICRMH0219U-729545-6/12

SPRING 2019 7

Figure 7: Recent Chinese trade slowdown shows negative impact of tariffs

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China imports

China exports

Source: Bloomberg, BlackRock, as of January 15, 2019.

A tale of flowsDespite weakness in Chinese equities throughout 2018, China-focused exchange traded fund products registered record inflows in 2018, gathering more than $6 billion in 2018. That’s in stark contrast to the $1.2 billion in inflows across all dedicated-country funds in the EM ex-China universe in 2018 (Source: Markit, BlackRock).

Figure 8 shows dedicated China ETP flows tend to be “stickier” than the aggregate emerging markets (EM) single-country universe. Chinese ETPs experienced inflows in all but three months of last year, compared with six months of outflows for other single-country EM exposures.

Figure 8: Over the last 12 months, China-focused ETPs gathered more inflows than all other single-country exposures combined

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7/18 9/18 11/18 1/193/18 5/181/18

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■ China ■ EM Single-Country ex-China

0

Source: Markit, BlackRock, as of January 22, 2019.

ICRMH0219U-729545-7/12

8 BLACKROCK INVESTMENT DIRECTIONS

Overview Despite the potential for inflation, stronger growth, Fed tightening and other trends that could impact long-term bonds, they still play a key role as potential ballast in times of equity volatility. We favor holding long-duration Treasuries and highly rated investment grade bonds for this purpose.

Fixed incomeBonds as ballast in portfolios

Key points • Concerns over duration risk. Investors have been concerned aboutduration risk as interest rates rose in 2018 due to Fed tightening,inflation fears and rising deficits.

• Yields fell during December’s risk-off environment. Long-durationU.S. Treasuries (as measured by the ICE U.S. Treasury 20+ Year Index)returned +5.6% in December.

• Reminder of bonds’ role as ballast. December was a stark reminderof the key role bonds play as a diversifier in a portfolio. We favorholding long-duration Treasuries and highly rated investment gradebonds for this purpose.

Market pulseFor much of 2018, investors reduced duration risk in their fixed income portfolios in response to the potential for rising interest rates driven by a number of factors: the threat of rising inflation, a backdrop of tightening Federal Reserve (Fed) policy, a shrinking Fed balance sheet, and increasing U.S. Treasury supply due to growing deficits.

Indeed, the 10-year U.S. Treasury yield rose from 2.41% on December 29, 2017 to a peak of 3.24% on November 8, 2018 before retracing in December during a strong risk-off environment. However, inflation never materialized. The realized Consumer Price Index over 2018 actually finished at 1.9% in December, down from 2.1% in January.

Figure 9: Headline U.S. CPI in 20183

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Source: Bloomberg, as of January 25, 2019.

The events of December 2018, in which U.S. equities (as measured by the S&P 500 Index) sold off by more than 9% and high yield credit spreads widened by more than one percent, reminded investors of the importance of holding high-quality fixed income exposures as ballast against risk assets despite the duration risk. In fact, long-duration U.S. Treasuries (as measured by the ICE U.S. Treasury 20+ Year Index) returned +5.6% in December.

ICRMH0219U-729545-8/12

SPRING 2019 9

Accordingly, despite a retracement of 10-year Treasury yields back below the 3% level, we believe that portfolio diversification with intermediate- to longer-duration Treasuries or highly rated investment grade corporate bonds would be beneficial in most investors’ portfolios.

Figure 10: S&P 500 Total Return Index vs. ICE U.S. Treasury 20+ Year Index December 2018

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.S. Treasury 20+ Year Ind

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Source: Bloomberg, as of January 25, 2019. Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

A tale of flowsU.S.-listed fixed income ETPs experienced $98 billion of net inflows in2018 (Source: Markit, BlackRock). Inflows were particularly concentrated inshort-duration exposures, not surprising given the rising interest rateenvironment experienced through most of the year.

However, the direction of benchmark rates reversed course toward the end of 2018 amid a slowdown in growth expectations. Against this backdrop, recent ETP inflows echoed this trend and suggest that investors have grown more comfortable with duration. The start of 2019 witnessed a slight rotation out of shorter-duration broad market exposures while long- and intermediate-term inflows held at relatively high levels on a proportional basis to their 2018 numbers.

Figure 11: Fixed income ETP flows by maturity and asset class in 2018 and 2019

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2018

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■ U.S. government ■ Municipals ■ Credit ■ Corporate ■ Broad market

0

Source: BlackRock, as of January 22, 2019.

ICRMH0219U-729545-9/12

10 BLACKROCK INVESTMENT DIRECTIONS

Q1 factor outlook

Outlook views • After seven consecutive quarters at a firm overweight, our outlook formomentum has now declined to a moderate overweight.

• Our outlook for minimum volatility has decidedly improved frommoderately underweight to moderately overweight this quarter.

• Our outlook for quality has moved back to neutral from moderatelyoverweight last quarter. We remain neutral on value, and underweight size.

Market pulse: Momentum on defense, divergence in quality While we advocate for a strategic allocation to all five factors for long-term outperformance and diversification, we have downgraded our short-term outlook for momentum from a firm to moderate overweight. We still hold a positive outlook in this supportive slowdown regime, but have moderated our view due to declining relative strength and rich valuations.

We have upgraded our outlook for minimum volatility to a moderate overweight this quarter for its downside protection in an environment of rising geopolitical and macro uncertainties. (For example, in 2018, the MSCI USA Minimum Volatility Index was up 1.55%, while the S&P 500 Index declined 4.38%.3) However, we are neutral on quality in the United States. Quality also exhibits defensive characteristics and has shown resilience in down markets, but is considered a return-seeking factor due to its historical outperformance versus the market. Our view on quality, however, improves when we look outside the United States and expand the scope to global equities, where valuations and relative strength are more supportive.

Figure 12: Regional differences1.0%

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7/18 9/18 11/18 1/195/183/181/18

Global relative strength

Global valuations

U.S. relative strength

U.S. valuations

Source: MSCI, BlackRock, as of December 31, 2018. U.S. Quality is represented by the MSCI USA Sector Neutral Quality Index. Global Quality is represented by the MSCI World Sector Neutral Quality Index. Valuation scores are based upon one-year forward earnings yield and cash flow-to-price metrics. A score greater than 0 indicates “cheap” while a score less than 0 indicates “expensive”. Relative Strength scores are based upon price momentum metrics.

Overview Tighter financial conditions and elevated concerns about trade frictions between the United States and China spooked investors in the fourth quarter of 2018, and have led to a heightened focus on portfolio resilience across our factor outlook for the first quarter. We favor momentum and minimum volatility in this environment.

3 Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Index performance does not represent actual iShares Fund performance. For actual fund performance, please visit www.iShares.com or www.blackrock.com.

ICRMH0219U-729545-10/12

SPRING 2019 11

Let us know…

How do you use this market commentary and do you find it useful? Please share your feedback and any questions or concerns you have at GroupiShares InvestmentStrategy@blackrock.com.

You also can find the latest market commentary from the ETF Investment Strategies & Insights group at iShares.com/insights.

Underweight: Potentially

decrease allocation

Neutral: Consider benchmark

allocation

Overweight: Potentially increase

allocation

Portfolio trends: Notes from the fieldThe BlackRock Portfolio Solutions team recently analyzed 9,940 models

provided by advisors from throughout the industry over the past

12 months. Three main takeaways:

• Observations from 2018: Corrections still happen and advisorportfolios were not well positioned for them coming into 2018. Second,cash actually produces yield—even after accounting for inflation.

• Concerns we are monitoring: We’ve seen a consistent overweight ofU.S. equities (and the U.S. dollar), underweight of U.S. Treasuries andshorter-duration in fixed income for many years, and higher yields thatsome feel may justify a cash buildup.

• Areas to focus on in 2019: First, to prepare for more potentialturbulence in 2019, it is important to build resilient portfolios that areproperly diversified. Second, distinguish between “bearish” and“uncertain.” For bearish views, consider adding more conservativeexposures such as areas in fixed income or minimum volatility. Whenmanaging uncertainty, it is important to avoid making large directional

bets for both bullish and bearish views.

Our View and OutlookGlobal Region underweight neutral overweight

Developed markets

North America

United States

Canada

Europe

Eurozone

United Kingdom

Asia Pacific

Japan

Emerging Markets

Asia Pacific

China

India

Latin America

Brazil

Mexico

Fixed Income Sector underweight neutral overweight

U.S. Treasuries

U.S. TIPS

U.S. Investment Grade Credit

U.S. High Yield Credit

U.S. Municipals

U.S. Mortgage-Backed Securities

Non-U.S. Developed Markets

Emerging Markets

underweight outlook slightly underweight outlook current neutral outlook slightly overweight outlook overweight outlook

ICRMH0219U-729545-11/12

Not FDIC Insured • May Lose Value • No Bank Guarantee

Lit. No. MKT-ID-0119F 191936T-0119

This material represents an assessment of the market environment as of the date indicated; is subject to change; and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

The information presented does not take into consideration commissions, tax implications, or other transactions costs, which may significantly affect the economic consequences of a given strategy or investment decision. This document contains general information only and does not take into account an individual’s financial circumstances. An assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a financial advisor before making an investment decision.

Carefully consider the Funds’ investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds’ prospectuses or, if available, the summary prospectuses which may be obtained by visiting iShares.com or BlackRock.com. Read the prospectus carefully before investing. Investing involves risk, including possible loss of principal.

International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/developing markets, in concentrations of single countries or smaller capital markets. Frontier markets involve heightened risks related to the same factors and may be subject to a greater risk of loss than investments in more developed and emerging markets. There is no guarantee that any fund will pay dividends.

Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. Capital gains distributions, if any, are taxable. Noninvestment-grade debt securities (high-yield/junk bonds) may be subject to greater market fluctuations, risk of default or loss of income and principal than higher-rated securities.

A fund’s use of derivatives may reduce a fund’s returns and/or increase volatility and subject the fund to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. A fund could suffer losses related to its derivative positions because of a possible lack of liquidity in the secondary market and as a result of unanticipated market movements, which losses are potentially unlimited. There can be no assurance that any fund’s hedging transactions will be effective.

An investment in the Fund(s) is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency and its return and yield will fluctuate with market conditions.

There can be no assurance that performance will be enhanced or risk reduced for funds that seek to provide exposure to certain quantitative investment characteristics (“factors”). Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. In such circumstances, a fund may seek to maintain exposure to the targeted investment factors and not adjust to target different factors, which could result in losses. The iShares Minimum Volatility ETFs may experience more than minimum volatility as there is no guarantee that the underlying index’s strategy of seeking to lower volatility will be successful.

Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than other industries, sectors, markets or asset classes and than the general securities market. Technology companies may be subject to severe competition and product obsolescence.

The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Barclays, Bloomberg Finance L.P., MSCI Inc., Morningstar, Inc., S&P Dow Jones Indices LLC. None of these companies make any representation regarding the advisability of investing in the Funds. BlackRock Investments, LLC is not affiliated with the companies listed above.

The iShares funds that are registered with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940 (“Funds”) are distributed in the U.S. by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

This material is solely for educational purposes and does not constitute an offer or solicitation to sell or a solicitation of an offer to buy any shares of any fund (nor shall any such shares be offered or sold to any person) in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities law of that jurisdiction.

The views expressed are as of the date indicated and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author, as applicable, and not necessarily those of Fidelity Investments. The experts are not employed by Fidelity but may receive compensation from Fidelity for their services. BlackRock/iShares and Fidelity are independent entities and are not legally affiliated.

©2019 BlackRock, Inc. All rights reserved. BLACKROCK, iSHARES, iBONDS and SO WHAT DO I DO WITH MY MONEY are registered trademarks of BlackRock, Inc. in the United States and elsewhere. All other marks are the property of their respective owners.

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