Market Watch: World's Biggest Sovereign Wealth Fund is Bracing for Inflation Shock That Hits Both Stocks and Bonds

Article by Vivien Lou Chen in Market Watch

The  CEO at Norges Bank Investment Management, responsible for managing the Norwegian Sovereign Wealth Fund, the world’s largest, is warning of the potential for an inflation shock that would hurt both stocks and bonds, according to a report by Bloomberg News on Wednesday.

Given extremely low bond yields and high stock valuations, “any major change in inflation will hit both parts of the portfolio,” CEO Nicolai Tangen of Norges Bank Investment Management, which manages Norway’s $1.4 trillion sovereign fund, told Bloomberg Television in an interview. “In the past, it’s been one and not the other. But this time, both can move in the same direction.”

Investors and analysts are increasingly sounding the alarm about the risks of inflation in recent days, with some saying it has the potential to drive major currency moves for the rest of the year and that higher expectations are the biggest risk facing financial markets through mid-2022.

On Wednesday, the U.S. Dollar Index was ......

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