- 2024-07-10
- News
Global Sovereign Wealth Fund Warns of Downward Stock Market Risks
Norwegian Bank Investment Management says, "It's time to be cautious"!
One of the world's largest investment institutions, Norwegian Bank Investment Management (NBIM), has stated that increased uncertainty and concerns surrounding the economic outlook imply that stock market risks are skewed to the downside.
NBIM manages Norway's $1.8 trillion sovereign wealth fund. The company says it is crucial to stay awake to future worries, although it maintains its stance of not making significant adjustments to asset allocation in the short term.
NBIM Deputy CEO Trond Grande said on Tuesday: "We (at the beginning) invested 70% in stocks and 30% in bonds, which is our typical investment in any market situation. But sometimes you also have to be realistic."
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He said, "Over the past 5 years, the size of the fund we manage has doubled. Our stock investment return rate has exceeded 100%. So, I think it's time to be cautious."
The Norwegian sovereign wealth fund is the world's largest sovereign wealth fund, established in the 1990s to invest the surplus income from the country's oil and gas industry. To date, the fund has invested in more than 8,760 companies in 71 countries worldwide.
Grande listed a series of concerns, including China's stimulus measures to restore confidence in the world's second-largest economy and the notion of "stagnant growth" in Europe.
"So, it's time to be cautious, and I think the downside risks in the stock market are greater than the upside risks," Grande said.
Just before NBIM warned about the stock market, the Norwegian sovereign wealth fund reported a third-quarter return of 4.4% and a profit of 835 billion Norwegian kroner ($76.1 billion).
The result was slightly lower than the benchmark index used by the fund to measure its performance, which was boosted by the rise in the stock market due to the decline in interest rates.As inflation rates have declined in many high-income countries, several major central banks have taken steps to ease monetary policy in recent months. On Tuesday, the International Monetary Fund (IMF) stated that while the global fight against inflation is "essentially won," downside risks are "increasing and currently dominate the outlook." It's not just Norway's sovereign wealth fund that is concerned about the stock market outlook for the coming months. Cantor Fitzgerald's Chief Equity and Macro Strategist, Eric Johnston, said last month that the downside risks for risk assets are very high. Johnston listed three main concerns for the U.S. economic outlook over the next three to six months: the decline in excess savings, consumer prices that are "too high," and the Federal Reserve's restrictive monetary policy. He made these remarks before the Federal Reserve's significant interest rate cut of 0.5 percentage points last month.
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