One of the world's largest investment institutions has issued a warning that increasing uncertainty and concerns about the economic outlook mean that the risk of a global stock market decline is very high.
On Wednesday, Trond Grande, the Deputy Chief Executive Officer of Norges Bank Investment Management (NBIM), said in an interview with CNBC that even though there are no plans for large-scale adjustments to asset allocation in the short term, one should always be vigilant about future risks. He stated:
"We started with a 70% equity and 30% bond allocation, and we typically maintain this allocation in any market scenario. But now is the time to be a bit more cautious."
The global stock market is currently facing an increasing number of risks, "Now is the time to be cautious."
The Norwegian Sovereign Wealth Fund is the world's largest sovereign wealth fund, managing a huge sum of $1.8 trillion. The fund was created in the 1990s with the purpose of investing Norway's oil and gas revenues overseas.
The fund's manager, Norges Bank Investment Management, is currently the world's largest single investor, holding shares in about 8,800 companies in 71 countries.
On Tuesday, the Norwegian Sovereign Wealth Fund's financial report showed that the fund made a profit of 835 billion Norwegian kroner (approximately $76.1 billion) in the third quarter of 2024. However, it also warned that rising uncertainty and a "completely different geopolitical situation" mean that the global stock market is currently facing an increasing number of risks.
According to the announcement, the fund's overall investment return rate in the third quarter was 4.4%, lagging behind the benchmark index by 0.1 percentage points.Grande listed what he considers to be risk factors, including the presidential election next month, as well as concerns about "stagnant growth" in Europe, all of which are downward factors for the stock market.
"Over the past five years, the size of the funds we manage has doubled, and our stock portfolio has returned over 100%. But I think it's time to be cautious."
It's not just Norway's sovereign wealth fund that is worried about the stock market outlook for the next few months, Cantor Fitzgerald's Chief Equity and Macro Strategist Eric Johnston also said last month that the downside risks for assets are very high.
Johnston listed three main concerns about the U.S. economic outlook for the next three to six months: declining savings, consumer prices that are "too high," and the Federal Reserve's monetary policy remaining restrictive.
