Bob Doll, BlackRock's chief equity strategist for fundamental equities, and Peter Fisher, its global head of fiixed income. sounded more cautious in their latest edition of “Investment Directions,” released Monday.

While economic indicators and corporate earnings continue to improve, global inflationary pressures and crises in the Middle East and Japan have lowered near-term growth expectations and expanded risks to the downside,” they said. But they still see opportunity in U.S. stocks and some bonds, including municipal bonds.

Stocks “will remain in a sideways trading pattern for some time,” Doll wrote. He favors U.S. multi-nationals and healthcare, telecommunications and energy. “We are growing more cautious on materials and industrials given near-term economic growth risks, and we still list the financials sector as our least favorite.”

The fixed-income markets face the end of the Federal Reserve’s bond buying program in June and bad press about government budgets. “We believe volatility will be higher in the year’s second half than now, and that yields will drift higher, but also that our favored credit spread sectors of high yield and securitized assets will continue to offer select opportunities,” Fisher wrote.

As for munis, he sees opportunities in state tax-backed and essential service bonds, particularly in the South and Midwest.