The Tell: ‘We are going to be living with inflation,’ warns BlackRock, offering this advice to investors

by | Feb 27, 2023 | Stock Market

Growth stocks may have led the early 2023 rally, but stubbornly high inflation means that won’t last. That’s the main message from the BlackRock Investment Institute on Monday, as U.S. stocks attempted to bounce after cementing their worst weekly losses of the year last week and as robust economic data pointed to challenges ahead for the Federal Reserve as it works to bring the cost of living to heel.

“High inflation has sparked cost-of-living crises, putting pressure on central banks to tame inflation with whatever it takes,” said the BlackRock Investment team led by Wei Li, global chief investment strategist. Importantly, the team also thinks “[w]e are going to be living with inflation,” since the Fed’s recent “cycle of outsized rate hikes will stop without inflation being back on track to return fully to 2% targets, in our view.” BlackRock Inc.
is the world’s biggest asset manager, overseeing about $9 trillion globally. BlackRock Investment Institute is its research arm. While the research team expects spending patterns to normalize and energy prices to “relent,” helping to cool inflation, they also see inflation “persisting above policy targets in coming years.” Read: Confused about what’s causing inflation? This metric shows what’s driving the price rise. On Friday, the Fed’s preferred inflation gauge, the Personal Consumption Expenditure, showed a 5.4% year-over-year increase in prices in January, up from a 5.3% rate the month before. The Federal Reserve has already raised its benchmark fed-funds rate to a 4.25%-4.75% range, up from nearly zero a year ago, with another increase expected in la …

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