A country’s overall economic activity is stagnant during a recession, which is a macroeconomic situation. All trading activities slow down during this period due to hyperinflation and other factors, causing GDP to fall sharply.
Blackrock, the world’s largest asset management company, has warned of the risk of a recession caused by central banks’ efforts to control inflation. In its 2023 Global Outlook report, the company predicts that this recession will be different from previous ones because loose monetary policy is unlikely to boost risk assets.
According to Blackrock, the central banks’ efforts to control inflation will lead to a slowdown in the global economy, resulting in a recession. This is a significant shift from the previous approach, where loose monetary policy was used to stimulate economic growth and boost risk assets.
According to the company, this shift in strategy will make it more difficult for investors to navigate the market and make informed decisions. As a result, Blackrock urges investors to be cautious and carefully consider their investment strategies to avoid potential losses.
Blackrock also forecasts that equities will suffer more than other assets because they are not priced in for this recession, as the economic damage from central banks’ actions is still building. The report states that central banks must stop tightening before reaching their inflationary targets to avoid economic crises.
The report concludes, “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 strategies for investors, as the traditional approach of “buying the dip” will not be effective in this environment.
CEO Larry Fink did not just forewarn the world about an impending economic recession; he also made comments about the cryptocurrency industry, stating that he believes most cryptocurrency companies won’t survive the collapse of FTX, one of the biggest exchanges in the world at the time, and the bear market will not go away soon. However, he thinks blockchain technology will be crucial for tokenizing securities in next-generation markets.
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