Central banks are driving us to ruin, says BlackRock, the world's largest asset manager
Investors, experts and political leaders alike agree that a recession is coming. In their view, it is not a question of if, but when and how. And the world's largest asset manager, BlackRock, has some worrying news.
Many experts are already sounding the alarm when it comes to the US economy. But BlackRock - the world's largest asset manager - has an even more radical warning. It is predicting an unprecedented recession.
"A recession is highly likely as central banks race to tame inflation," BlackRock 's team of strategists write in their global outlook for 2023. In fact, they believe that central banks are deliberately causing a recession by tightening policy too much in an attempt to bring the price level under control.
In the past, when the economy went into a downturn, the Fed usually stepped in to help. But given the cause of this supposed recession, we can't count on the central bank, according to BlackRock.
"Central bankers won't come to the rescue this time when growth slows."
And that doesn't bode well for stocks. The S&P 500 index is down nearly 20% in 2022, but BlackRock believes stock valuations don't yet reflect the damage ahead.
If this recession turns out to be different than previous ones, it may be time to look for non-traditional ways to hedge against it. Here are three assets worth considering.
And what does BlackRock recommend?
Primarily to think about what they claim and play by the rules that this situation could bring. The company has broken this down into 3 points.
What sectors or assets can do well in such a situation?
Higher interest rates can cool the economy when it gets too hot. However, the economy is not very buoyant and BlackRock sees rate rises pushing the economy into recession. And in such a situation, it is usually the most basic of consumer goods that thrive. Basic consumer goods are basic products such as food and beverages, household goods and hygiene products.
We need these things no matter how the economy is doing or what the federal funds rates are. You can afford a Gucci bag in a crisis, but not soap and food.
When inflation raises input costs, companies producing basic consumer goods - especially those with a strong market position - are able to pass those higher costs on to consumers. A typical example of such a dominant position might be the old familiar $PG-0.9%.
Disclaimer: This is by no means an investment recommendation. This is purely my summary and analysis based on data from the internet and other sources. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.