The 'everything' bull market is over now that inflation has gone from no problem to a big problem, BlackRock strategist says

The bull market is over, BlackRock strategist Ben Powell said. ATU Images/Getty Images

• Investors can't rely on a bull market to keep lifting asset prices any more, BlackRock's Ben Powell said.
• Inflation has gone from being no problem to a big problem, the strategist told Bloomberg TV.
• It's time to become more active in picking the assets and places to invest in, Powell said.

Investors can no longer rely on stocks and other assets to keep logging gains like they used to, according to a top BlackRock strategist.

It's become clear that inflation is not coming down as quickly as hoped, and that means the Federal Reserve might keep hiking interest rates, Ben Powell told Bloomberg TV on Tuesday.  

"We can't just be levered long everything — the 'everything' bull market sadly is over," said Powell, chief APAC strategist at the BlackRock Investment Institute.

Powell said there had been a fundamental change to a world economy shaped by supply pressures, rather than driven by demand. The outcome of that supply problem is higher inflation, he argued, and it has important implications for investors making portfolio decisions.

"The big point being — sorry for this — but it's going to be harder, because inflation has gone from being no problem to a big problem," he added.

The Fed has raised its key interest rate from near zero to almost 5% in the past year, in an attempt to cool inflation running at historic highs. It expects to lift them even higher in the coming months. 

Powell noted the Fed has a mandate to bring the rate down to 2%. It came in 6.4% for January, the last reading — moderating to the lowest level in over a year but still off the record 9.1% in June.

Given that, investors have to take a more active approach to picking where to put their money than in the past, he said.

"We're going to have to be a bit more specific in where we're investing, both by geography and asset class," Powell said.

He said investors should consider taking a more dynamic approach to their portfolios now and make choices to respond to swings in assets. 

"We might need to make more choices a bit more often because markets are going to be more volatile," he said. "That's just the math. Things are more volatile and riskier, then we should be less certain going forward." 

Stocks had a dismal 2022, with the S&P 500 logging a 19.4% loss for the year, as investors grappled with what direction the Fed would take with interest rates. That came after several years of gains, as rates stayed near record lows. 

In the first weeks of this year, the stock market rallied as investors thought that cooling inflation would allow the US central bank to pull back on its aggressive monetary tightening. This changed when investors woke to the realization that all signs suggest that rates will remain higher for longer.