Here's why BlackRock is forecasting a brutal global recession

Good morning, readers. I'm Phil Rosen, reporting from New York.

Some good news: We're on the brink of the weekend.

Even better news: Tomorrow you'll receive a special weekend edition of the Opening Bell newsletter, featuring my conversation with one of Wall Street's most sought-after strategists.

But today we're talking macro. The global economy this year has faced more obstacles than a Tough Mudder, but far less optimism about coming out of it for the better.

Stubborn inflation, steep rate hikes from central banks, and geopolitical tensions have pushed the world's largest asset manager to share an altogether frosty prognosis for what's to come in 2023.

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1. A worldwide recession is just around the corner, and BlackRock is expecting it to bring more market turbulence than ever before.

The global economy is leaving a four-decade stretch of stable growth and modest inflation to enter a period of massive upheaval and instability, BlackRock analysts wrote in the firm's 2023 Global Outlook.

"Recession is foretold as central banks race to try to tame inflation. It's the opposite of past recessions," they said. "Central bankers won't ride to the rescue when growth slows in this new regime, contrary to what investors have come to expect. Equity valuations don't yet reflect the damage ahead."

Limited policy support is going to mean investors need to be more dynamic, and stay nimble with their investments.

That requires a "granular view on sectors, regions and sub-asset classes," the analysts said, adding that what worked in the past won't work now, and "buying the dip" no longer applies to this regime.

What's more, BlackRock said that markets haven't fully priced in the potential magnitude of the impending recession, since earnings have yet to reflect even a small downturn.

Jan Szilagyi, CEO of financial research firm Toggle AI, told me yesterday he agrees with BlackRock's bleak outlook, but said it may not materialize until the second half of 2023 — thanks, in part, to a still-tight labor market.

"Job growth is still way over the speed limit the Fed needs to get below," Szilagyi said. "[And] wage growth has been driven by wage expectations, the single largest driver of the pick-up in wages, and previously a non-factor."

The Fed, as a result, is going to have to stay aggressive to contain inflation expectations, he added.

As for stocks, Szilagyi recommended investors start looking into longer-maturity fixed income positions, and said he expects beaten-down value names to outperform growth stocks.

"The market probably bottoms before recession starts," he noted.

What's your recession forecast for 2023?

A) More than 50% odds

B) Less than 50% odds

C) We're already in a recession

Tweet me (@philrosenn) or email me (prosen@insider.com) to let me know.

In other news:

2. US stocks tick higher in the final trading session of the week. All three of the major indexes are on pace for losing weeks despite Thursday's gains, and investors are eyeing fresh inflation data due out today, as well as next week's Fed meeting. Here's how markets are moving this morning.

3. On the docket: Atlas Technical Consultants, Li Auto Inc, and Northern Oil and Gas, all reporting.

4. These are the four smartest places to put your money after a brutal year, according to a fund manager at JPMorgan. He explained how to reduce risk and make sound bets heading into 2023 — and how to prop up your savings as traditional 60-40 portfolios suffer.

5. Russia's central bank just issued a warning about "new economic shocks" coming from sanctions. The recent implementation of the oil price cap, too, will weigh on the warring nation, according to a recent report out of Moscow. Get the full details here.

6. Kevin O'Leary said he lost almost $10 million in the FTX collapse. In an interview on CNBC, he also revealed that the company paid him $15 million to be a spokesman. "We all look like idiots."

7. The CEO of Coinbase said the exchange will see revenue plunge at least 50% this year. So far in 2022, the company has cut 18% of its staff, or about 1,200 roles. Shares of Coinbase are down 82% this year.

8. A real estate investor who owns nine retail properties explained why he's putting his money in strip malls. The residential market has stolen headlines, but Justin Sloan is eyeing what he sees as the next gold mine in investing. In his view, skyrocketing rents means more opportunity.

9. This 33-year-old house-hacked his way into free rent and three cash-flowing units in three years. He strategically picked a good start-up property and had a renter pay off the mortgage. Here's how he got his start in real estate.

10. GameStop stock popped 10% on Thursday, despite a third-quarter earnings miss. CEO Matt Furlong said the retailer is eyeing potential acquisitions as part of a mission to "accomplish something unprecedented in the retail sector."

Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email prosen@insider.com

Edited by Max Adams (@maxradams) in New York.