Blackrock, one of the world’s largest asset management firms, has warned that 2023 will be a recession year unlike any other recession in the past. In its recently released 2023 Global Outlook report, Blackrock says a new economic playbook is needed in a world defined by a supply-side economy and high levels of inflation.
Blackrock predicts recession and persistent inflation
Blackrock, an asset management and investment firm, has presented its predictions on what the next year could bring to the financial markets. The company, which has an estimated $8 trillion in assets under management, predicts a period of recession caused by central bank policies to control inflation. However, according to its 2023 Global Outlook report, this recession will be different from previous ones.
The report explains:
Recession is predicted as central banks rush to try to control inflation. This is the opposite of past recessions: Loose policy is not on its way to help support risk assets, in our view.
In addition, Blackrock predicts that equities will likely suffer more as they are not expected to be in this recession, as the economic damage from central bank actions is still building. With respect to inflation, the report states that central banks will have to stop tightening policy before they reach their inflationary targets and cause economic crises.
On this point, the report concludes that “even with a recession ahead, we think we will live with inflation.“
Joint bull markets not on the horizon
The firm believes that the new economic configuration calls for new ways of dealing with the markets. Indeed, the old playbook of “buying the dip” will not be effective, as there is a need to continually reassess how dynamic policies being exercised create economic damage.
Accordingly, the report states:
We do not see a return to conditions that would support a joint bull market in stocks and bonds of the type we have seen over the past decade.
The firm has also issued its opinion on crypto and crypto-currency companies in the past. Larry Fink, the CEO of Blackrock, said he believes most crypto companies will not survive the fall of FTX, once one of the largest crypto exchanges in the market. However, he acknowledged that blockchain technology will be important as a tool to help tokenize securities in next-generation markets.