The biggest asset manager of the world: prepare for a recession like never before!

The global economy has emerged from an era of stable growth and inflation for four decades to enter in a period of growing instability, while the new system that undermines predictability is here to stay, as seen by the largest asset manager of the world.

The recession is approaching in around the world as central banks rise in aggressively lower borrowing costs to tame inflation, BlackRock said, noting that more market turmoil will flare up this time around than ever before.

This means that policy makers will not be in able to support markets, as they have during previous recessions, wrote a team of BlackRock strategists led by Vice President Philip Hildebrand in a report titled Global Outlook 2023.

They said: “The recession is expected as central banks race to try and tame inflation. Unlike previous recessions, central bankers will not come in rescue when growth slows down in this new system, contrary to what investors expect”.

“Stock valuations don’t reflect the damage to come,” they added.

The prospect of limited policy support means that investors need a more proactive approach, involving more frequent portfolio switches and taking a “more detailed view of sectors, regions and sub-classes of assetto address future volatility,” according to BlackRock.

greater fluctuations

Which worked in the past won’t work now, strategists said, and the old guideline of buying lows doesn’t apply to this system of sharper trade-offs and macroeconomic swings.

They continued, “We don’t see a return to conditions that will maintain a common bull market in stocks and bonds, as we saw in the previous decade.”

The Banks of Wall Street, from Morgan Stanley and Bank of America to Deutsche Bank, they warned that US stocks could fall more than 20% in 2023, due to the economic recession and liquidity risks fueled by the Federal Reserve’s interest rate hike.

David Solomon, CEO of Goldman Sachs, thinks there is only a 35% chance that the US economy will avoid a recession.

signs of recession

A slowdown in the housing market, delays in corporate investment plans, declining consumer savings and deteriorating CEO confidence are early signs of the next recession, according to BlackRock.

However, experts said the stock market hasn’t picked up yet in consider the potential scale of the impending economic downturn, Business Insider reported.

They added, “We don’t think equities are fully pricing in the recession… Corporate earnings expectations have not yet fully reflected a modest recession.”

S&P 500 index of large US stocks up more than 12% from its lowest level in 23 months hit in October, driven primarily by expectations that the Federal Reserve will slow the pace of interest rate hikes after the recent drop in inflation.

Read More About: Business News