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As investors look ahead to 2024, they still need to decide whether to take the risk in equity markets, or keep their savings in cash. Cash rates remain high for the time being, and there are a range of factors that could create market volatility in the year ahead. Nevertheless, while the future is uncertain, there are a number of reasons to hold faith in the markets for long term income and capital growth.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

2023 has demonstrated the potential opportunity cost to cash savings: US stocks, as measured by the S&P 500 Index, delivered 26.3% for the year to December 2023^[1]. There are no guarantees that this will persist, but there are clear risks to holding cash at a time when interest rates may fall.

There are headwinds to stock market performance. Higher valuations, inflation, and rates may mute overall stock market returns relative to the previous decade. There is also scope for political disruption arising from a busy election year around the globe. It is also possible that a number of the world’s major economies fall into a mild recession. However, we believe these headwinds are readily managed when investing in North American companies by a focus on quality and on areas of real value in the market.

Beyond the ‘Magnificent 7’

We are starting to see investors broaden their horizons. In 2023, the index’s top stocks, dubbed the “Magnificent 7,” drove the lion’s share of return. In the meantime, the equal-weighted S&P 500, which allocates a share of the index to all 500 constituents equally, saw more modest positive returns^[2]. But in the closing weeks of 2024, the equal-weighted index started to outperform again.

This would appear to mark a return to normal patterns. 2023 marked one of the worst periods for the equal-weighted approach (and best for market-cap weighted) in 20 years. Looking at the relative performance of the two indices over the past two decades, periods of strong outperformance for one approach tend to be balanced by periods of outperformance for the other. This suggests to us that the equal-weighted S&P 500 could take the lead in the year ahead. This view is also supported by the significant valuation gap between the market cap weighted index and equally weighted index.

Broadening leadership in North American equities

However, less important than the performance of the index in aggregate is the widening market breadth and greater potential for stock-level dispersion it implies. This would be welcome. It would suggest that investors have the confidence to look more widely than just a handful of technology stocks.

We always think quality is important, but particularly so at a time when the economic environment is uncertain. Nevertheless, after a strong year in some parts of the market, we find more of the quality stocks we’re looking for in smaller cap companies, which are priced well below their long-run average. This presents opportunities for stock pickers.

Key themes for BRSA in the year ahead

We find a number of areas with a wealth of sustainable investment opportunities. In healthcare, for example, developments in ‘GLP-1s’ - diabetes drugs with positive weight-loss side effects - are creating waves. The drug makers have benefited, while other parts of the healthcare complex brace for a drop in demand. If obesity levels fall, people are likely to need fewer insulin pumps and sleep apnea machines, for example.

There are also opportunities in the re-engineering of global supply chains. The U.S. Inflation Reduction Act, CHIPS Act and infrastructure bill create incentives for U.S. manufacturers to build operations closer to home. We see potential divergence in the auto industry, as an example, where some manufacturers may qualify for greater EV subsidies than others.

We believe 2024 may see the market grow less concentrated and look beyond the AI beneficiaries and “magnificent seven”. As our process focuses on those sustainable North American companies with strong fundamentals and sound future prospects, we welcome this shift.

For more information on this Trust and how to access the potential opportunities presented by North American markets, please visit www.blackrock.com/uk/brsa

Risk Warnings

Investors should refer to the prospectus or offering documentation for the funds full list of risks.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Fund-specific risks

BlackRock Sustainable American Income Trust plc

Capital Growth / Income Variation, Currency Risk, Derivatives Risk, Derivative Risk (Derivatives, Options, Covered calls) , Gearing Risk, Investment Trust Disclaimers

Description of Fund Risks

Capital Growth / Income Variation

Investors in the Fund should understand that capital growth is not a priority and values may fluctuate and the level of income may vary from time to time and is not guaranteed.

Currency Risk

The Fund invests in other currencies. Changes in exchange rates will therefore affect the value of the investment.

Derivative Risk (Derivatives, Options, Covered calls)

The Fund uses derivatives as part of its investment strategy. Compared to a fund which only invests in traditional instruments such as stocks and bonds, derivatives are potentially subject to a higher level of risk.

Derivatives Risk

Derivatives may be highly sensitive to changes in the value of the asset on which they are based and can increase the size of losses and gains, resulting in greater fluctuations in the value of the Fund. The impact to the Fund can be greater where derivatives are used in an extensive or complex way.

Gearing Risk

Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.

Investment Trust Disclaimers

Net Asset Value (NAV) performance is not the same as share price performance, and shareholders may realise returns that are lower or higher than NAV performance.

Important Information

In the UK this is issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: + 44 (0)20 7743 3000. Registered in England and Wales No. 02020394. For your protection telephone calls are usually recorded. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock.

UK Investment Trust Funds: This document is marketing material. The Company is managed by BlackRock Fund Managers Limited (BFM) as the AIFM. BFM has delegated certain investment management and other ancillary services to BlackRock Investment Management (UK) Limited. The Company’s shares are traded on the London Stock Exchange and dealing may only be through a member of the Exchange. The Company will not invest more than 15% of its gross assets in other listed investment trusts. SEDOL™ is a trademark of the London Stock Exchange plc and is used under licence.

Net Asset Value (NAV) performance is not the same as share price performance, and shareholders may realise returns that are lower or higher than NAV performance.

The investment trusts [listed below/above/in this document] currently conduct their affairs so that their securities can be recommended by IFAs to ordinary retail investors in accordance with the Financial Conduct Authority’s rules in relation to nonmainstream investment products and intend to continue to do so for the foreseeable future. The securities are excluded from the Financial Conduct Authority’s restrictions which apply to non-mainstream investment products because they are securities issued by investment trusts. Investors should understand all characteristics of the funds objective before investing. For information on investor rights and how to raise complaints please go to https://www.blackrock.com/corporate/compliance/investor-right available in local language in registered jurisdictions.

BlackRock has not considered the suitability of this investment against your individual needs and risk tolerance. To ensure you understand whether our product is suitable, please read the fund specific risks in the Key Investor Document (KID) which gives more information about the risk profile of the investment. The KID and other documentation are available on the relevant product pages at www.blackrock.co.uk/its. We recommend you seek independent professional advice prior to investing.

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 is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer.

© 2024 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS and iSHARES are trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners.

MKTGH0324E/S-3437399

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