INVESTMENT DIRECTIONSSpring 2020

iShares.com

Spring feverThe term “spring fever” describes the contradictory emotions people have as the new season approaches: listlessness alongside energy, ennui next to excitement. It could also define the current mood in the markets: relief at the easing of trade frictions, expectations of an economic rebound and optimism around earnings, tempered by concerns surrounding the impact of the coronavirus and ongoing geopolitical tensions. Our take on the major investor themes for the weeks ahead:

U.S. equities: The cyclical versus the structural Although we expect a modest uptick in economic activity, cyclical sectors appear expensive as prices seem to have outrun the data. We would focus on sectors benefiting from secular trends, namely tech and healthcare. The low-yield environment suggests investors will still seek additional multi-asset carry to reach income goals.

Megatrends: A climate turning point Gauging the impact of climate change risks is now an increasing priority for the private sector, in businesses’ strategic objectives and capital allocation decisions. But the shift to renewable energy production and the emergence of technological innovations, like electric cars, present significant potential as long-term investment opportunities.

International markets: Looking east Given the unknowable fallout from the coronavirus in China, investors will likely remain cautious. However, we see potential for other cyclically oriented countries such as Japan and emerging market (EM) equities to outperform. A weaker U.S. dollar should help those regions.

Fixed income: The virtues of carry and qualityWe favor high yield bonds based on expectations of supportive monetary policy and the prospect of stronger growth, along with agency mortgage-backed securities (MBS) exposures that may provide the potential for additional yield above Treasuries. Short-duration TIPS can help serve as a potential inflation hedge while limiting exposure to interest rate risk.

Factors: Value, the comeback king? We have upgraded value to a moderate overweight. Value’s relative strength has rallied from the depressed levels seen last year, while valuation measures like forward-looking earnings and cash flow-to-price support our view. But we believe a longer-run catalyst is needed for our model to move to a high-conviction overweight.

Chris DhanrajHead, U.S. iShares Investment Strategy

ContributorsJasmine Fan

Elizabeth Grenfell

Thomas Logan

Stephen LaipplyHead of U.S. Fixed Income iShares

Patrick NolanPortfolio Strategist with the BlackRock Portfolio Solutions Team

Sara ShoresHead of Investment Strategy for the Factor-Based Strategy Group

EditorDavid Kurapka

ICRMH0220U-1093805-1/12

U.S. equitiesThe cyclical versus the structural

Key points • A growth rebound. We expect a modest uptick in U.S. and global economic

activity. However, after 2019’s valuation-driven rally, a successful handoff from easier financial conditions to better growth and a pickup in earnings is critical for sustained equity performance.

• Cyclicals are fully priced. Equity markets appear to have outrun the data and are already pricing in a large growth rebound, marking a rather dramatic reversal in market expectations since our last publication.

• Favor secular trends, while looking for carry. We remain constructive on tech and healthcare given strong secular trends. In a continued low-yield environment, investors may need to take more risk to reach income goals.

Market pulseWe believe economic growth will accelerate in the coming months, yet we have reduced our U.S. equity positioning to neutral in our 2020 outlook. More than 90% of last year’s rally was due to multiple expansions, but going forward, strong earnings growth will be necessary to justify valuations and sustain the rally.1 This is especially true given the stronger growth outlook U.S. assets have recently priced in.

Market-implied growth expectations now look quite elevated and returns are likely skewed toward the downside near term. Either economic data must catch up to the elevated market pricing or markets sell off to more realistically reflect the data.

Thus, we turn to long-term structural growth for guidance and reiterate our preference for technology and healthcare, two of the biggest R&D spenders.2 Each sector has strong organic growth, and we believe election fears regarding healthcare will continue to abate.

Figure 1: Global asset yields: Pre-crisis versus today

987654321

Yiel

d (%

)

-10

U.S.

dol

lar c

ash

Yen

cash

U.S.

10Y

gov

. bon

dsGe

rman

10Y

gov

. bon

dsU.

K. 1

0Y g

ov. b

onds

Japa

n 10

Y go

v. bo

nds

U.S.

corp

orat

e bon

ds

Euro

pean

corp

. bon

ds

U.K.

corp

orat

e bon

ds

Japa

n co

rpor

ate b

onds

U.S.

hig

h yie

ld

Euro

pean

hig

h yie

ld

Asia

hig

h yie

ld

Emer

ging

deb

t ($)

Emer

ging

deb

t (lo

cal)

U.S.

equi

ty d

ivide

nd yi

eld

Euro

equi

ty d

ivide

nd yi

eld

U.K.

equi

ty d

ivide

nd yi

eld

Japa

n eq

uity

divi

dend

yiel

d

■ Pre-crisis (June 2007) ● Current yield

Euro

cash

Ster

ling

cash

Source: BlackRock, Thomson Reuters, as of January 31, 2020. 1m LIBOR indexes used for cash, Datastream benchmark 10-year government bond indexes, Merrill Lynch corporate and high yield bond indexes, JP Morgan emerging market indexes for EM debt, Datastream total market equity indexes for equities. 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.

OverviewWe prefer exposures reflecting structural trends over cyclicals, such as tech and healthcare, amid a moderately pro-risk position within U.S. equities.

CONSIDER • iShares U.S. Technology

ETF (IYW)

• iShares Exponential Technologies ETF (XT)

• iShares U.S. Healthcare ETF (IYH)

• iShares Global Healthcare ETF (IXJ)

1 Source: Refinitiv, as of January 27, 2020. Analysis based on S&P 500 Index. 2 Source: Bloomberg, as June 30, 2019.

2 INVESTMENT DIRECTIONS | SPRING 2020ICRMH0220U-1093805-2/12

Meanwhile, in January, concerns first over geopolitical tensions and later potential pandemics helped drive interest rates lower, with the 10-year Treasury yield now hovering around 1.5%, as of January 31.3 As such, despite the anticipated growth rebound, investors may still need to consider taking on risk in seeking yield and consider dividend growers, preferreds and other multi-asset yield opportunities.

Figure 2: Lofty expectations: Markets have priced in a sizeable growth rebound

65

60

55

50

45

ISM

man

ufa

ctu

rin

g in

dex

402006 2012 2014 2016 2018 2020

● Market-implied ISM ● U.S. ISM

2008 2010

Source: BlackRock, Bloomberg, as of January 24, 2020. Note: Market-implied ISM is a statistical estimate of how markets are pricing U.S. growth expectations. We extract the first principal component (PC1) from the daily returns of growth-sensitive assets to capture the common (i.e., macro) variation across assets. To align units of measurement, PC1 is scaled to match the mean and standard deviation of the ISM. U.S. assets include S&P 500, S&P 500 cyclicals ex-tech vs. defensives and U.S. 10-year yield.

A tale of flowsInvestor positioning is seldom a catalyst, but it can be a strong amplifier, particularly around key inflection points. The past several months represent a somewhat new market regime as the bond proxy trade faded, overall geopolitical risk abated, and a cyclical growth rebound took shape. Since equity investor positioning was muted and skewed toward defensive bond proxies, this created a scramble to add U.S. equity exposure and rotate into more cyclical areas.

Global ETF flows bear this out. Defensive bond proxy sectors such as consumer staples and utilities led global ETF flows when growth expectations and rates were still declining. But once growth expectations began to rise, they saw the largest outflows and cyclical sectors such as industrials and materials saw the largest increases, which further corroborates the notion that markets have priced in (and allocated to) a growth rebound.

Figure 3: Global ETF flows: Chasing upside exposure

Utilities

Technology

Real estate

Global ETF flows, % of AUM

Materials

Industrials

Healthcare

Financials

Energy

Consumer staples

Consumer discretionary

-15% -5 0-10 5 10 15 20

● 3 months ● 12 months

Source: BlackRock, as of January 27, 2020.

3 Source: Bloomberg, as of January 31, 2020.

3ICRMH0220U-1093805-3/12

MegatrendsA climate turning point

Key points • A heating world. Scientists now estimate that global temperatures could

increase by three degrees Celsius by the end of the century,4 raising risks to human health, food supply and economic growth.

• Measuring the risks. Gauging the impact of climate change risks is an increasing priority for businesses’ strategic objectives and capital allocation decisions.

• A shift to renewable energy. Bloomberg New Energy Finance (BNEF) estimates that two-thirds of electrical energy production will come from renewable resources by 2050, particularly wind and solar. The likely growth in demand underscores their potential as investment opportunities.

Market pulseThe average global temperature has increased approximately 1.4 degrees Fahrenheit (less than one degree Celsius) since the early 20th century, according to the National Oceanic and Atmospheric Administration.5 And while the degree of future change is unknown and estimates vary, current broad consensus is that the world could warm by roughly three degrees Celsius by 2100.6 Even just 1.5 degrees Celsius of warming could increase risks to health, food supply and economic growth, according to the most recent report by the UN Intergovernmental Panel on Climate Change.7

Assessing the potential impact of this climate change has become an ever-growing priority for companies’ strategic and capital allocation decision-making processes. Furthermore, central bankers, consulting firms and Wall Street have all started to evaluate the risk of climate crisis, similar to how they have historically looked at financial crisis risk. We believe this will help drive investments in renewable energy as people demand sustainable sources of growth.

According to BNEF, solar and wind power will be the main renewable resources by 2050. Although burning fossil fuels represents roughly two-thirds of total electrical energy production today, this will shift to two-thirds renewable resources in 30 years. This is key as energy demand is expected to increase by 62% over this same time period.8

In short, we believe we are at an important turning point in evaluating climate change and resource scarcity. January’s World Economic Forum, where the theme was “Stakeholders for a Cohesive and Sustainable World,” is just one example of climate change conversations gaining momentum on a global stage, a trend we expect will continue.

4 https://www.wsj.com/articles/a-clearer-climate-picture-emerges-11579530420?mod=searchresults&page=1&pos=13. Accessed on January 21, 2020.5 https://www.ncdc.noaa.gov/monitoring-references/faq/indicators.php#warming-climate. Accessed on January 21, 2020.6 https://www.wsj.com/articles/a-clearer-climate-picture-emerges-11579530420?mod=searchresults&page=1&pos=13. Accessed on January 21, 2020.7 https://www.ipcc.ch/sr15/. Accessed on January 21, 2020.8 https://www.enelgreenpower.com/media/news/d/2019/07/bloomberg-new-energy-outlook-2019. Accessed on January 21, 2020.

OverviewClimate change is increasingly on the minds of businesses and investors, who are evaluating both the risks and the opportunities as demand for clean energy increases over the coming years and decades.

CONSIDER • iShares Global Clean Energy

ETF (ICLN)

• iShares Self-Driving EV and Tech ETF (IDRV)

4 INVESTMENT DIRECTIONS | SPRING 2020ICRMH0220U-1093805-4/12

A tale of flowsSustainable investing is gaining in popularity globally with record inflows into Environmental, Social, and Governance (ESG) focused funds in 2019. U.S.-listed sustainable funds saw a major uptick in flows in 2019 compared to previous years: 2019 net inflows to ESG funds totaled $8.5 billion compared to $2.3 billion in 2018.

As global investors start to pay more attention to the impact of climate-related risks, sustainable strategies with a distinct focus on investing in clean energy resources, such as solar and water, and renewable energy technology have grown at an extremely rapid pace. Flows into U.S.-listed clean energy themed ETFs increased from $190 million in 2018 to $890 million in 2019 (Figure 4). With increasing demand for sustainable investing and a shift in global power generation from two-thirds fossil fuels to two-thirds renewables in the next 30 years, investors may seek more opportunities in the clean energy space to catch up with the trend.

Figure 4: U.S.-listed flows into clean energy themed ETPs

0.8

0.6

1

0.4

0.2

-0.2

-0.4

2011 2013 2015 2017 2019-0.6

Flow

($ b

llion

)

0

Source: Markit, as of December 31, 2019. Annual flows into U.S.-listed ETPs that focus on clean energy investments.

5ICRMH0220U-1093805-5/12

International equityLooking east

Key points • Global growth rebound. We see potential for cyclical assets such as Japanese

and emerging market (EM) equities to outperform as manufacturing and global trade recover.

• Expect stable to weaker USD. Higher international growth and a reprieve in U.S./China tensions should reduce perceived safe-haven demand for U.S. dollars, weakening the dollar and supporting international equities and EM currencies.

• Europe expensive, Asia cheap. We prefer cyclical exposure in Japanese and EM equities over European equities given higher sensitivity to global manufacturing and cheaper valuations.

Market pulseThe potential for a global trade and manufacturing rebound augurs well for both European and Asian assets. Although European manufacturing looks poised for an uptick as new orders improve and the inventory cycle turns, we prefer to take our cyclical exposure in Japanese and EM assets.

Japanese and EM equities both have a higher sensitivity to global manufacturing and cheaper valuations than their European counterparts (See Figure 5). Similar to U.S. equities, European stocks appear to have already priced in a growth rebound while EM and Japanese equities appear comparatively cheaper. In other words, Europe would need to grow into current market pricing while no such growth rebound appears priced into EM and Japanese equities.

Moreover, a stronger U.S. dollar has weighed on international markets recently, yet many of its drivers appear poised to reverse as global growth firms, rate differentials converge, and perceived safe-haven demand for the U.S. dollar declines. This particularly underpins our preference for EM equities.

As of this writing, fallout from the coronavirus in China is unknown and difficult to predict. Recent Chinese manufacturing and trade data came in better than expected and Japanese growth has rebounded after the consumption tax. For clients looking to stay in EM but wary of China-related risks, EM ex-China exposures may provide a useful international building block.

Figure 5: Sensitivity to global manufacturing

● Earnings ● Return

5

4

3

2

1

Sen

siti

vity

0U.S. Europe EM Japan

Sources: BlackRock Investment Institute, with data from Refinitiv, MSCI, the Netherlands Bureau for Economic Policy Analysis, and the National Bureau of Economic Research, January 2020. Notes: Each region’s equity market is represented by the respective MSCI index. Sensitivity to global industrial production is calculated by comparing the changes in 12-month forward earnings estimates and equity market total return to the changes in global industrial production on a rolling three-month basis. We used the world industrial production data from the Netherlands Bureau for Economic Policy Analysis and forward earnings based on I/B/E/S estimates in this study, from the start of 2000 to October 2019 excluding recessions.

OverviewAn uptick in global manufacturing and trade activity favors a tactical tilt into more cyclical exposures, including EM and Japanese equities.

CONSIDER • Core MSCI Emerging

Markets ETF (IEMG)

• iShares MSCI Japan ETF (EWJ)

• iShares Currency Hedged MSCI Japan ETF (HEWJ)

• iShares MSCI China ETF (MCHI)

• iShares MSCI Emerging Markets ex China ETF (EMXC)

6 INVESTMENT DIRECTIONS | SPRING 2020ICRMH0220U-1093805-6/12

A tale of flowsDespite the improving global backdrop, global ETF flows to Japanese and EM equities remain somewhat muted. Flows picked up at year-end, but the pace quickly fell to start this year.

One of the more interesting flow trends has been the disconnect between EM equity returns and flows. Typically, ETF flows track returns, yet EM equity flows remained surprisingly strong as returns suffered. And as performance recovered, global ETF flows to EM equities tapered off. Perhaps more noteworthy have been the inflows to EM equity ETFs used for asset allocation, while financial instrument ETFs–typically a cleaner read on market sentiment–have seen outflows.

Figure 6: EM equity ETF flows

● MSCI Emerging Markets Index ● EM Equity ETF Flows

40 80

30 60

20 40

10 20

0 0

-10 -20

-20 -40

An

nu

al g

row

th (%

) ETF fl

ows ($bn

)

-60-302012 2013 2014 2015 2016 2017 2018 2019 2020

Source: BlackRock, Refinitiv, as of January 27, 2020. 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.

7ICRMH0220U-1093805-7/12

Fixed IncomeThe virtues of carry and quality

Key points • Focus on the coupon. We are overweight high yield bonds based on

expectations of supportive monetary policy and the prospect of a growth inflection.

• High quality and potential additional yield. With policymakers on hold and a stable interest rate environment on the horizon, agency mortgage-backed securities (MBS) exposures provide the potential for additional yield above Treasuries.

• Inflationriskunderappreciated.Although there are no immediate signs of overheating in the U.S. economy, we believe that inflation risks may be underpriced. Short-duration TIPS provide the potential for hedging inflation risk while limiting exposure to interest rate risk.

Market pulsePeriodic market volatility aside, the current environment appears to be one of sustainable economic growth, a patient Federal Reserve and constrained inflation and interest rates. Such an environment bodes well for risk assets such as equities and high yield. While we view high yield as being fully valued, there is still merit in the carry if you believe this environment will persist.

That said, there is also need for portfolio ballast given tight valuations and vulnerability to exogenous risk-off shocks (e.g., pandemic fears). For this reason, we continue to like agency MBS and shorter-duration TIPS as U.S. Treasury surrogates. Agency MBS are less fully valued than corporate bonds and historically outperform Treasuries in a relatively stable rate environment from a carry standpoint.

Figure 7: MBS valuations look attractive relative to other sectors

● 3yr spread range ● Average ● Current

180

160

140

120

100

80

60

40

20

0U.S. MBS U.S. IG Corp

Spr

ead

(bas

is p

oin

ts)

U.S. CMBS Euro AggregateCorporate

Source: BlackRock, Bloomberg, as of December 31, 2019.

OverviewWe would favor high yield bonds based on expectations of supportive monetary policy and stronger growth. We would also consider agency MBS for the potential yield above Treasuries. Meanwhile, we believe that inflation risks may be underpriced and would consider short-duration TIPS.

CONSIDER • iShares 0-5 Year High Yield

Corporate Bond ETF (SHYG)

• iShares Broad USD High Yield Corporate Bond ETF (USHY)

• iShares Edge High Yield Defensive Bond ETF (HYDB)

• iShares MBS ETF (MBB)

• iShares 0-5 Year TIPS Bond ETF (STIP)

8 INVESTMENT DIRECTIONS | SPRING 2020ICRMH0220U-1093805-8/12

In addition, almost by definition, there is some risk of increasing inflation. We remain at historically low levels of unemployment, wage growth is picking up, and there has been some strength in commodity prices. These factors all pose a risk for an unexpected increase in inflation, currently underpriced by the market, in our opinion. Given the Fed’s response function, increasing inflation could lead to rising real rates if the Fed were to resume tightening. For this reason, we prefer shorter-duration TIPS, which will hedge investors against higher realized inflation while limiting duration exposure to rising real interest rates.

Figure 8: Markets have recently underappreciated the risk of inflation

● Difference expected-actual (LHS) U.S. core PCE (YoY, %) U.S. 10-year inflation breakevens (%) Fed's 2% target

5040

2.5%

3020

2

100

1.5

-10

1

-200.5

bps

0-301/17 7/17 1/18 7/18 1/19 7/19 11/19

Source: BlackRock, Bloomberg, as of January 31, 2020.

A tale of flowsDemand for fixed income ETFs continued to grow in the second half of 2019. Total net inflows into U.S.-domiciled fixed income ETFs reached $149.5 billion in 2019, easily surpassing the $142 billion into equity ETFs. As more investors look for quality in fixed income assets, U.S.-listed investment grade exposures experienced more than $35 billion of inflows while high yield bonds saw ETF inflows of $17.5 billion throughout 2019. Inflation-focused ETFs had $1.8 billion of inflows, concentrated at the short-end of the curve.

As the Fed cut rates three times throughout 2019, U.S.-listed Treasury ETFs saw tremendous inflows into the long-end of the curve—$10.3 billion and $37 billion into U.S.-listed intermediate and long-term U.S. Treasury ETFs, respectively—while short-term exposures only experienced $0.23 billion of inflows (Figure 9). However, this trend is likely to reverse as the Fed signaled a hold in policy rates in the upcoming months.

Figure 9: 2019 fixed income ETP flows by sector

● Emerging markets ● HY ● Inflation ● IG ● Muni ● U.S. Treasury

20

15

10

5

0

-5

Flow

in $

bill

ion

s

-10Feb Apr Jun Aug Oct DecJan Mar May Jul Sep Nov

Source: Markit, as of December 31, 2019. Flows are subject to change.

9ICRMH0220U-1093805-9/12

Q1 factor outlookValue, for now

Outlook views • Moderate overweight on value. As discussed below, value’s valuations have

cheapened and relative strength has improved, driving our upgrade from neutral.

• Maintain moderate overweight on quality. Its relative strength has improved. This more defensive factor continues to be favored in the current slowdown regime and reinforces our positive outlook.

• Neutral on min vol. Our outlook for minimum volatility has decidedly declined back to neutral. Relative to other factors, valuations overall appear expensive.

• Moderate underweight on momentum. Our outlook has mildly improved from a firm underweight last quarter. Its relative strength has slightly weakened while valuations remain expensive.

• Firm underweight on size. We move from a moderate to firm underweight on size, as its relative strength has deteriorated and appears quite weak.

Market pulseOur factor-tilting model has been underweight to neutral on value for the past 18 months, due to an unattractive outlook across multiple metrics, particularly an unsupportive economic regime of slowing growth. Historically, value stocks tend to underperform in the late stages of an economic cycle because those companies tend to have large amounts of fixed capital that make them more inflexible when adjusting to an economic slowdown. Our negative outlook relative to other factors proved beneficial; our underweight to value was the model’s best-performing position in 2019.

After a recent bounce in performance that began with an impressive September 2019, we have started to see trends building for the factor and have upgraded our view to a moderate overweight. Value’s relative strength has rallied from the depressed levels seen at the start of 2019 and into the summer. Continued cheapness across both cash flow and forward-looking valuation measures also supports our view.

While our outlook has improved, we remain cautious toward value in the continued slowdown regime. We believe a longer-run catalyst is needed for our model to move to a high-conviction overweight. For now, we take a measured tilt toward value in the short run as recent trends and valuations appear supportive.

Figure 10: Turning trendsValuation & relative strength scores for value

Relative strength Cash flow to price Forward earnings yield

1

2

0

-1

Z-S

core

-26/18 9/18 12/18 3/19 6/19 9/19 12/19

Source: BlackRock, as of December 31, 2019. Value is represented by the MSCI USA Enhanced Value Index. Z-scores measure values’ strength relative to their means. A Z-score greater than 0 indicates “cheap” while a Z-score less than 0 indicates “expensive.” Relative strength is a measure of price momentum.

OverviewOur outlooks for value and momentum have improved, while we remain moderately overweight quality. We remain cautious on value for the longer term, but recent trends appear supportive.

CONSIDER • iShares Edge MSCI USA

Quality Factor ETF (QUAL)

• iShares Edge MSCI USA Size Factor ETF (SIZE)

• iShares Edge MSCI USA Momentum Factor ETF (MTUM)

• iShares Edge MSCI USA Value Factor ETF (VLUE)

• iShares Edge MSCI Min Vol USA ETF (USMV)

10 INVESTMENT DIRECTIONS | SPRING 2020ICRMH0220U-1093805-10/12

Portfolio trends: Notes from the fieldThe BlackRock Portfolio Solutions team analyzed 16,581 models provided by advisors from throughout the industry over the past 12 months. Three main takeaways:

• The old debate of “active versus passive” should evolve to a framework of blending index, alpha and factors. We found 35% of advisor models are already combining index, factor and actively managed products.

• It’s key to use factors effectively. Factors can be tools for building resilience into portfolios, either by attempting to reduce volatility during the market cycle or by adding persistent sources of alpha over the long run.

• Average fees break the 50 bp barrier. The average fee on advisor portfolios has dropped to 49 basis points (bps, or 0.49% points). At the end of 2016, the figure was 56 bps.

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 GroupiSharesInvestmentStrategy@blackrock.com

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

Our View and OutlookGlobal Region underweight neutral overweight

Developed markets

North America

United States

Canada

Europe

Eurozone

United Kingdom

AsiaPacific

Japan

Emerging Markets

AsiaPacific

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

Underweight: Potentially decrease allocation

Neutral: Consider benchmark allocation

Overweight: Potentially increase allocation

11ICRMH0220U-1093805-11/12

Lit No. MKT-ID-0220 204195T-0220

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.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. 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. There may be less information on the financial condition of municipal issuers than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. Some investors may be subject to federal or state income taxes or the Alternative Minimum Tax (AMT). 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.Shares of iShares ETFs may be bought and sold throughout the day on the exchange through any brokerage account. Shares are not individually redeemable from the ETF, however, shares may be redeemed directly from an ETF by Authorized Participants, in very large creation/redemption units.The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Barclays, Bloomberg Finance L.P., Cohen & Steers Capital Management, Inc., European Public Real Estate Association (“EPRA® ”), FTSE International Limited (“FTSE”), ICE Data Services, LLC, India Index Services & Products Limited, JPMorgan Chase & Co., Japan Exchange Group, MSCI Inc., Markit Indices Limited, Morningstar, Inc., The NASDAQ OMX Group, Inc., National Association of Real Estate Investment Trusts (“NAREIT”), New York Stock Exchange, Inc., Russell or 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. Neither FTSE nor NAREIT makes any warranty regarding the FTSE NAREIT Equity REITS Index, FTSE NAREIT All Residential Capped Index or FTSE NAREIT All Mortgage Capped Index; all rights vest in NAREIT. Neither FTSE nor NAREIT makes any warranty regarding the FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index, FTSE EPRA/NAREIT Developed Europe Index or FTSE EPRA/NAREIT Global REIT Index; all rights vest in FTSE, NAREIT and EPRA.“FTSE®” is a trademark of London Stock Exchange Group companies and is used by FTSE under license. 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.All information about U.S.-based iShares funds is intended for institutional investors in Canada only. Institutional investors must qualify as a “permitted client” within the meaning of National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations, as an “accredited investor” within the meaning of National Instrument 45-106 – Prospectus Exemptions, and must not be an individual. If you do not meet these eligibility criteria, do not access or use this material. The U.S.- based iShares funds have not been nor will they be qualified for sale to the public under applicable Canadian securities laws and, accordingly, any purchase or sale of the U.S.-based iShares funds in Canada that occurs as part of a distribution, and any subsequent resale, must be made on a basis which is exempt from or not subject to the prospectus requirements of Canadian securities laws. You are advised to seek Canadian legal advice prior to any purchase or resale of U.S.-based iShares funds.In Latin America, for Institutional and Professional Investors Only (Not for Public Distribution):It is possible that some or all of the funds mentioned or inferred to in this material have not been registered with the securities regulator of Brazil, Chile, Colombia, Mexico, Peru, Uruguay or any other securities regulator in any Latin American country, and thus, might not be publicly offered within any such country. The securities regulators of such countries have not confirmed the accuracy of any information contained herein. No information discussed herein can be provided to the general public in Latin America. In Hong Kong, this information is issued by BlackRock Asset Management North Asia Limited. This material is for distribution to “Professional Investors” (as defined in the Securities and Futures Ordinance (Cap.571 of the laws of Hong Kong)) and should not be relied upon by any other persons. In Singapore, this document is issued by BlackRock (Singapore) Limited (company registration number: 200010143N) for institutional investors only. For distribution in Korea and Taiwan for Institutional Investors only (or “professional clients,” as such term may apply in local jurisdictions). This document is for distribution to professional and institutional investors only and should not be relied upon by any other persons. This document is provided for informational purposes only and does not constitute a solicitation of any securities or BlackRock funds in any jurisdiction in which such solicitation is unlawful or to any person to whom it is unlawful. Moreover, it neither constitutes an offer to enter into an investment agreement with the recipient of this document nor an invitation to respond to it by making an offer to enter into an investment agreement. Past performance is not a guide to future performance. There are risks associated with investing, including loss of principal. Changes in the rates of exchange between currencies may cause the value of investments to fluctuate. This document is for informational purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock fund and has not been prepared in connection with any such offer. Any research in this document has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy. This document contains general information only and does not take into account an individual’s circumstances and consideration should be given to talking to a financial or other professional adviser before making an investment decision. You are reminded to refer to the relevant prospectus for specific risk considerations which are available from BlackRock websites. BlackRock® is a registered trademark of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other trademarks, servicemarks or registered trademarks are the property of their respective owners. ©2020 BlackRock Inc. All rights reserved.Notice to residents in Australia:FOR WHOLESALE CLIENTS AND PROFESSIONAL INVESTORS ONLY – NOT FOR PUBLIC DISTRIBUTIONIssued in Australia by BlackRock Investment Management (Australia) Limited ABN 13 006 165 975, AFSL 230523 (“BlackRock”). This information is provided for ‘wholesale clients’ and ‘professional investors’ only. Before investing in an iShares exchange traded fund, you should carefully consider whether such products are appropriate for you, read the applicable prospectus or product disclosure statement available at iShares.com.au and consult an investment adviser. Past performance is not a reliable indicator of future performance. Investing involves risk including loss of principal. No guarantee as to the capital value of investments nor future returns is made by BlackRock or any company in the BlackRock group. Recipients of this document must not distribute copies of the document to third parties. This information is indicative, subject to change, and has been prepared for informational or educational purposes only. No warranty of accuracy or reliability is given and no responsibility arising in any way for errors or omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock. No representation or guarantee whatsoever, express or implied, is made to any person regarding this information. This information is general in nature and has been prepared without taking into account any individual’s objectives, financial situation, or needs. You should seek independent professional legal, financial, taxation, and/or other professional advice before making an investment decision regarding the iShares funds. An iShares fund is not sponsored, endorsed, issued, sold or promoted by the provider of the index which a particular iShares fund seeks to track. No index provider makes any representation regarding the advisability of investing in the iShares funds.©2020 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered and unregistered trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners.

Not FDIC Insured • May Lose Value • No Bank Guarantee

ICRMH0220U-1093805-12/12