BlackRock Predicts End of ‘Great Moderation’ and Greater Market Volatility Ahead

Key Points:

  • BlackRock predicts end of "great moderation"
  • Greater market volatility ahead
  • Long-term inflation expected to remain above 2%
  • Negative outlook for equities, especially growth.

1 - 2 minute read

Leading financial institutions have conflicting forecasts for 2023. For Deutsche Bank, the current CPI inflation rate of 7.1% is already factored into market prices. If inflation stays low, the bank thinks stock prices will rise. It’s important to note, though, that these inflation statistics are frequently contested, with some contending that real inflation is actually in the double digits.

JP Morgan is less optimistic, saying that while the economy will have a bad year, the market will have a good one. Since there aren’t as many houses on the market as there were in 2008, the bank doesn’t think there’ll be a housing crash. BlackRock, however, is pessimistic, predicting that we are entering a period of increased macro and market volatility and proclaiming the end of the “great moderation” of the past four decades. Equity prices, particularly growth stocks, are predicted to decline further by BlackRock, which does not see a revival of former bull markets. The company forecasts that inflation will continue above 2% for the foreseeable future.

Concerns regarding liquidity and the possibility for additional market manipulation are heightened by these forecasts in the wake of the Federal Reserve’s reverse repos reaching a record $2.554 trillion. Elon Musk, however, has made news as the first person to lose $200 billion, albeit he may recoup it all in a bull market. Keeping an eye on these changes and taking into account the differing viewpoints of significant actors in the financial industry is crucial as we navigate the unpredictable economic landscape of 2023.

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