(Bloomberg) -- BlackRock Investment Institute strategists cut their recommendation for developed-market stocks to neutral, citing concerns about global economic growth from Federal Reserve tightening and China risks.

The tactical downgrade of US, Japanese and European equities reflects “a higher risk of central banks overtightening policy and a deteriorating growth backdrop in China and Europe,” according to a note from strategists including Jean Boivin and Wei Li.

“Their appeal relative to bonds has also diminished,” they wrote. “The risk has risen that central banks slam the policy brakes as they focus solely on inflation without fully acknowledging the high costs to growth and jobs.”

Global stocks have been slumping this year, with the S&P 500 on Friday flirting with a bear market. Investors fear that hawkish central banks will push major economies into a recession amid surging inflation. Even after the recent declines, Morgan Stanley strategists said today it’s too early to turn optimistic on stocks given persisting risks to growth.

The BlackRock team said they’re keeping an overweight in US Treasuries, as well as inflation-linked bonds and prefer short-term government bonds for carry, seeing scope for long-term yields to rise further. Going forward, the strategists said a dovish shift in Fed policy would make them consider adding to equity allocations.

“The Federal Reserve signaled its focus is on taming inflation without flagging the big economic costs this will entail,” they wrote. “As long as this is the case and markets believe it, we don’t see the basis for a sustained rebound in risk assets.”

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