Blackrock, one of the largest asset management companies in the world, has warned that 2023 will be a year of recession different from other recessions in the past. As part of its recently issued 2023 Global Outlook report, Blackrock states that a new economic playbook is required in a world defined by a supply-based economy and high levels of inflation.
Blackrock, an asset management and investment company, has presented its predictions for what the next year might bring to financial markets. The company, which is estimated to hold $8 trillion in assets under management, foresees a period of recession caused by the policies of central banks directed at controlling inflation. However, according to its 2023 Global Outlook report, this recession will be different from previous downturns.
The report explains: "Recession is foretold as central banks race to try to tame inflation. It’s the opposite of past recessions: Loose policy is not on the way to help support risk assets, in our view".
Furthermore, Blackrock predicts that equities will likely suffer more as they are not priced in for this recession, as the economic damage caused by the actions of central banks is still building. When it comes to inflation, the report states that central banks will have to stop tightening policies before reaching their intended inflationary targets and causing economic crises.
On this, the report concludes that “even with a recession coming, we think we are going to be living with inflation.”
The firm believes that the new economic configuration calls for new ways of facing the markets, as the old playbook of “buying the dip” will not be efficient as there has to be a continuous reassessment of how the dynamic policies exerted create economic damage.
As a result of this, the report declares: "We don’t see a return to conditions that will sustain a joint bull market in stocks and bonds of the kind we experienced in the prior decade".
The firm has also issued its opinion about crypto and cryptocurrency companies in the past. Larry Fink, the CEO of Blackrock, stated that he believed most cryptocurrency companies would not survive the downfall of FTX, formerly one of the largest cryptocurrency exchanges on the market. However, he did recognize that blockchain tech will be important as a tool to help tokenize securities as part of next-generation markets.