Banks and asset managers that have reiterated recession calls include BlackRock, Wells Fargo and Neuberger Berman, with many warning the Federal Reserve is unlikely to force inflation lower without hurting economic growth.
Correctly gauging the economy is crucial for investors. Stocks tend to perform poorly in economic downturns, with the S&P 500 falling an average of 29% during recessions since World War Two, according to Truist Advisory Services.makes it unlikely that one has already started.Many strategists are focused on the Fed, pointing to years of market history that suggests the central bank's rapid rate hikes will eventually force unemployment higher and tip the economy into a recession.
The latter outlook is not shared by BoFA’s strategists, who recommended positions that would benefit from a “grind lower” in U.S. equities, noting that Fed "cutting cycles in history have almost exclusively been associated with either a recession ... or a financial accident," they said. The current stock rally “hints at how markets will likely react once inflation eases and rate hikes pause,” wrote analysts at BlackRock, the world’s largest asset manager, earlier this week. “Before this outlook becomes reality, we see stocks falling when recessions we expect manifest.”