Investors now need a new portfolio playbook that involves more frequent changes, balancing views on risk appetite with estimates of how markets are pricing in economic damage. The playbook also calls for taking more granular views by focusing on sectors, regions and sub-asset classes rather than broad exposures, says the BlackRock Investment Institute (BII) in its 2023 Global Investment Outlook.
Recession is imminent — no longer will central banks ride to the rescue when economic growth slows. Instead, central banks are triggering recessions with aggressive tightening as they prioritise reining in inflation. Having enjoyed four decades of largely stable economic activity and low inflation, investors will now have to confine “The Great Moderation” to history.
BlackRock, one of the world’s largest asset managers, says central banks will “eventually” back off from rate hikes as the economic damage hits home. However, inflation will settle at a higher rate than before, significantly above the widely bandied 2% level at around 2.75%.
