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By Jeremy Glaser | 10-03-2013 11:00 AM

Richardson: Likely to See More Volatility

Fiscal uncertainty, a new Fed chair, and the upcoming taper are likely to introduce more volatility in equity and fixed-income markets, says BlackRock's Heidi Richardson.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. I'm here at the 2013 ETF Invest Conference with Heidi Richardson. She is a global investment strategist for BlackRock. We're going to look at some of the big trends in the market right now and what it means for investors.

Heidi, thanks so much for joining me.

Richardson: Thanks for having me.

Glaser: Let's start with the government shutdown. That's obviously top-of-mind at the moment. What impact do you think the shutdown is going to have on, particularly, the equity markets? Are we in store for some more volatility?

Richardson: Well, I think that looking at what's happening in U.S. Fed now with economic policy, whether it's the shutdown, whether it's looking at the debt ceiling that were coming up upon or whether it's a new Fed chairman, we're likely to have more volatility not only in the U.S. equity markets, but also in the fixed income market.

I think if we look at the shutdown, it depends how long we're shutdown. The contribution to economic growth that will detract from is unlikely to be too much if this is a short-term shutdown, but I think it's just more the longer it goes, the more volatility that we're likely to see in the system.

Glaser: How about the debt ceiling, though? Is that a bigger worry for you?

Richardson: The debt ceiling absolutely is a bigger worry. If we think about the debt ceiling, it could go now to the 11th hour in terms of coming to some resolution on the debt ceiling and continuing to raise the limits on that. The worrisome thing is if we potentially defaulted on our debt, which I think is highly unlikely, but if we default on the debt, then it's going to be much more of an issue on global financial markets, not just the U.S. market.

Glaser: Is there anything investors can do in terms of preparing for a potential debt-ceiling problem, or is it just kind of risk that will be difficult to diversify away?

Richardson: I would say if you had money that you were thinking about putting in the market over the next couple of weeks, you might want to wait until Oct. 17 in terms of waiting for that to happen. If for some reason, we did actually breach the debt ceiling and we defaulted, we could have a potential downgrade on U.S. Treasuries and our debt. We could see a run in gold because it would be the one flight to safety that we would be able to see in the marketplace.

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