As investors bet that global central banks will gradually begin policy shifts this year, thereby boosting prices of risky assets, some market participants have given a reminder of this frenzy.

On the 15th, Nicolai Tangen, CEO of Norway's sovereign wealth fund, told the media at the World Economic Forum in Davos that he is preparing for a sluggish market performance in the coming years as inflationary pressures may persist. "In terms of returns, we are not very optimistic," he said. "The potential inflationary pressure is greater, and I think it will last longer. International central banks will be very careful when cutting interest rates too quickly because they raise rates too slowly."

The Norwegian Sovereign Wealth Fund was established in 1996, with funds sourced from the country's oil and gas revenue as a strategic reserve to protect the future of the Norwegian economy in the event of energy depletion. Its latest scale reached $1.5 trillion. The fund is currently the world's largest single stock owner, holding shares in over 9000 companies, accounting for approximately 1.5% of all shares in listed companies worldwide. As of the end of June 2023, 71.3% of the fund invested in equity assets, 26.4% invested in fixed income assets, 2.3% invested in unlisted real estate, and 0.1% invested in unlisted renewable energy infrastructure.

Affected by the international energy downturn, inflation in major global economies quickly fell in the fourth quarter of last year, boosting expectations of a shift in the tightening cycle. First Financial reporters have noticed that the current interest rate market shows that the Federal Reserve, European Central Bank, and Bank of England have all lowered interest rates more than five times throughout the year.

However, with the end of the base effect, both the latest inflation indicators in the United States and the eurozone have rebounded, but the pricing of interest rate cuts has not fluctuated significantly as a result. Officials from the three major central banks have repeatedly cooled expectations for easing, emphasizing the need for more data to prove that the price threat has gradually disappeared and that interest rates may remain high in the short term.

Several Wall Street giants have also issued warnings recently. Jamie Dimon, CEO of JPMorgan Chase, believes that massive government deficit spending and a series of other factors may make inflation more sticky, and it is expected that interest rates in 2024 will be higher than market expectations. Philipp Hildebrand, Vice Chairman of BlackRock, said that the slowdown in the Consumer Price Index (CPI) has brought a false sense of security to financial markets, and inflation may be more severe than expected.

Regarding the price outlook, Tan Gen said, "We have some potential inflationary pressures, and many countries have very high wage demands, which should lead to a spiral of inflation in the future. Then we will be affected by some weather conditions, which is negative for pricing. In addition, there are geopolitical, trade issues, and so on."

He also reminded that known risks are not as worrying as unexpected factors. "What really makes the market turbulent is something we never thought about: financial crisis, earthquake, COVID-19, and so on. We don't know what the year 2024 will be, but we can be sure that it will also be something that no one has thought about."

It is worth mentioning that Tan Gen also raised concerns about inflation and returns during another event he attended last week. "The biggest challenge is creating returns in an increasingly difficult world," he added. "Reducing inflation may be more difficult than many people expect. I have observed that many investors and economists are very optimistic about the rate of interest rate decline, and I am not sure if this will happen."

Affected by global growth concerns, Norway's sovereign wealth fund suffered a loss of $34 billion in the third quarter of last year. According to the schedule, the fund will release its operational data for the entire year of last year on January 30th.