Investment giant BlackRock is warning investors that markets are unlikely to resume their smooth upward trend that was enjoyed for much of the decade before the Covid pandemic upended the global economy. In its updated midyear outlook, the BlackRock Investment Institute said that global markets are moving out of a period of "great moderation" and investors should be prepared to navigate choppy waters for the foreseeable future. "The Great Moderation, a period of steady growth and inflation, is over, in our view. Instead, we are braving a new world of heightened macro volatility — and higher risk premia for both bonds and equities. ... We ultimately expect central banks to live with inflation, but only after stalling growth," the report said. "The result? Persistent inflation amid sharp and short swings in economic activity. We stay pro-equities on a strategic horizon but are now underweight in the short run." Under the new regime, the strategy of "buying the dip" and the traditional portfolio split between 60% stocks and 40% bonds are unlikely to be winners, BlackRock said. That's been the case so far in 2022, with stocks falling into a bear market last month and Treasury yields spiking in the face of Federal Reserve interest rate hikes. In its short-term tactical view, BlackRock is underweight long-dated U.S. Treasurys and developed market stocks, including the U.S. The money manager, which ran almost $10 trillion in assets at the end of the first quarter, is overweight inflation-linked bonds and other parts of the credit market. "Investors are compensated for owning credit these days. A majority of fixed income assets are yielding 4% or more for the first time in more than a decade," the report said. The tactical view covers the next six-to-12 months, the report said. Longer-term, however, the firm remains overweight equities and underweight fixed income. — CNBC's Michael Bloom contributed to this report.