Trond Grande, Deputy CEO of Norges Bank Investment Management, during a press conference on Tuesday, January 30, 2024, in Oslo, Norway.
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Norges Bank Investment Management (NBIM), one of the world’s largest investors, said rising uncertainty and concerns about the economic outlook mean stock market risks are tilted to the downside.
NBIM, which manages Norway’s $1.8 trillion sovereign wealth fund, said that while it maintained its position that it would not make a large-scale asset allocation adjustment in the short term, it was important to remain clear-headed about concerns about the future.
Trond Grande, deputy chief executive of NBIM, said: “We (started out) holding 70% stocks, 30% bonds, which is typically where you would find us in any market situation.
“We’ve doubled the size of the funds we run over the past five years. Our equity portfolio has returned over 100%. So, I think now is a time to be a little more cautious.”
Norwegian wealth fund, the world’s largestestablished in the 1990s to invest surplus revenues from the country’s oil and gas industry. To date, the fund has invested in more than 8,760 companies in 71 countries around the world.
Among the concerns cited by NBIM’s Grande were the U.S. political climate ahead of next month’s presidential election, China’s stimulus measures to restore confidence in the world’s second-largest economy and talk of “stagnant growth” in Europe.
“So now is the time to be cautious, and I think there is more downside than upside risk to the stock market,” Grande said.
NBIM issued the stock market warning shortly after Norway’s sovereign wealth fund reported third-quarter returns of 4.4% and profits of NOK 835 billion ($76.1 billion).
The result was slightly lower than the benchmark index against which the fund measures itself, and was boosted by a rise in stocks due to falling interest rates.
With inflation falling in many high-income countries, several major central banks have taken steps to ease monetary policy in recent months.
The International Monetary Fund said on Tuesday that while the global fight against inflation was “almost won”, downside risks “are increasing and now dominate the outlook”.
“The environment is very difficult”
Norway’s sovereign wealth fund isn’t the only one worried about the outlook for the stock market in the coming months.
Eric Johnston, chief equity and macro strategist at Cantor Fitzgerald, said last month that downside risks to these assets are very high.
Johnston cited three major concerns about the U.S. economic outlook over the next three to six months: falling excess savings, “too high” consumer prices and some constraints on the Federal Reserve’s monetary policy.
“Oh, by the way, China’s GDP is 17% of the world’s, so that’s a drag,” Johnston said in an interview with CNBC.The closing bell rings on September 12th. “So, I think it’s a very, very difficult environment.”
Johnston’s comments came after the Federal Reserve slashed interest rates by half a percentage point last month.
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