The Polyurethane Economy: Flexible And Adaptable

Akhmad Bayuri/iStock through Getty Photos

Rick Rieder and group argue that the U.S. financial system continues to show polyurethane-like flexibility and resilience, regardless of encountering extraordinary shocks. Traders want the identical qualities to navigate 2023.

Kitchen sponges, ski boots, luxurious mattresses and nuclear

Chart of Aggregate demand flexed one way and then the other

Supply: Bureau of Financial Evaluation, information as of November 30, 2022

Chart of lower paying, pandemic-hit jobs have lots of room to recover as they flex back into position.

Supply: Bureau of Labor Statistics, information as of December 31, 2022

Chart of Inflation momentum has turned in most categories.

Supply: Bureau of Labor Statistics, information as of November 30, 2022

Chart of 2-Year U.S. Treasury real yields are near the highs of this century.

Supply: Bloomberg, information as of January 20, 2023

Chart of US AGG vs S&P Profitability of Loss

Sources: Bloomberg and BlackRock, information as of January 20, 2023 (*Likelihood of Loss is predicated on realized volatility and assumes a traditional distribution. Forecasts are primarily based on estimates and assumptions. There isn’t any assure that they are going to be achieved.)

Chart of high quality fixed income has more compelling valuations than equities

Sources: Bloomberg and BlackRock, information as of January 20, 2023

Chart of international assets

Supply: Bloomberg, information as of January 20, 2023

chart of International equity valuations are looking more attractive next to a dollar that is past peak

Sources: Bloomberg and BlackRock, information as of January 20, 2023

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