BlackRock shares a 2-part stock-trading strategy for an expected downturn in stocks as the Fed forces the economy into a recession with higher rates
With inflation still elevated, a strong economy means the Fed will push on the gas pedal more.
To avoid the resulting downturn, invest in short-term Treasurys and emerging market stocks, the firm says. For a brief moment, good news was once again good news for investors. Now, good news appears to once again be bad news. 's aggressive tightening regime. Ordinarily, that would be a positive thing for investors if inflation were coming down as fast as the Fed would like. But price growth is proving sticky — consumer prices were up 6.4% year-over-year in January, down slightly from 6.
"We don't think inflation is on track to return to policy targets – and a recession would be needed to get it down. That means solid activity data should be viewed through its implications for inflation," said"In other words: Good news on growth now implies that more policy tightening and weaker growth later is needed to cool inflation," he continued."That's bad news for risk assets, in our view.
Over the last year, the Fed has raised rates from near-zero to 4.5%, instituting four consecutive 75-basis-point hikes along the way, the fastest pace in decades.
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