One of the world’s largest investment firms, BlackRock, has urged investors to prepare for turbulence in the stock market due to 3 factors: a looming recession, a higher interest rate and the opening of businesses in China in 2023 that will disrupt the market, writes Business Insider.

“The 3 changes we expect in 2023 reinforce our views and are the reason we maintain our defensive stance,” the strategists said in a note.

First, sharp rate hikes by central banks to bring inflation down to target levels will trigger a recession in developed markets. Interest rates are now at their highest level since 2008, and the yield curve for Treasury bonds with maturities of 2 and 10 years – a known predictor of recession – is in the deepest inversion in more than 40 years.

Second, central banks will pause raising rates because of the recession, but are unlikely to cut them given the risk of inflation spiraling out of control.

“It will take an even deeper recession than we foresee in the future for inflation to return to target. That’s why central banks are keeping rates high for longer than the market expects, rather than cutting them.”

And third, business start-ups in China could spur growth in other areas of the global economy while developed markets struggle with recession and high rates. BlackRock strategists say that means emerging market stocks could outperform developed market stocks.