Editing BlackRock Sustainable American Income Trust
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Exhibit 2a shows the performance of US and UK shares over the last decade. The broad US market, as shown by the S&P 500 Index, has performed significantly better than both US value and UK shares. It is unsurprising that within the US, investors have favoured growth over value names given the ultra-low level of interest rates. However, the macroeconomic backdrop is changing; inflationary pressures are building, fuelled by higher commodity and wage costs, and the US Federal Reserve has started to tighten monetary policy. Risks of an economic slowdown or a recession are rising, especially if the central bank is behind the curve and has to accelerate the pace of interest rate increases to try and combat higher inflation. The geopolitical environment is also challenging due to the war in Ukraine and ongoing tensions between the US and China. | Exhibit 2a shows the performance of US and UK shares over the last decade. The broad US market, as shown by the S&P 500 Index, has performed significantly better than both US value and UK shares. It is unsurprising that within the US, investors have favoured growth over value names given the ultra-low level of interest rates. However, the macroeconomic backdrop is changing; inflationary pressures are building, fuelled by higher commodity and wage costs, and the US Federal Reserve has started to tighten monetary policy. Risks of an economic slowdown or a recession are rising, especially if the central bank is behind the curve and has to accelerate the pace of interest rate increases to try and combat higher inflation. The geopolitical environment is also challenging due to the war in Ukraine and ongoing tensions between the US and China. | ||
Exhibit 2a: Total return performance of US and UK equities over 10 years (£) | |||
[[File:Total return performance of US and UK equities over 10 years (£).png|600px]] | |||
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|+Exhibit 2b: Valuation metrics of Datastream indices (at 24 May 2022)<ref | |+Exhibit 2b: Valuation metrics of Datastream indices (at 24 May 2022)<ref>Source: Refinitiv, Edison Investment Research.</ref> | ||
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