Inflation driven by tariffs is likely to be one of the greatest threats to markets this year, according to Norwegian sovereign wealth fund Norges Bank.
Norges Bank CEO Nicolai Tangen spoke at the World Economic Forum in Davos this week, following Donald Trump’s inauguration as United States president. Trump said on Monday that he would impose tariffs of 25% on Mexico and Canada, starting 1 February.
“I don't think I should give any advice to the U.S., but if you look at the risk to financial markets, I think inflation is for sure one, all driven by tariffs,” said Tangen in Davos.
“Many of the suggestions now coming out of the U.S. are potentially inflationary. They could cause more inflation. There could be less labour supply, there could be more tariffs — all of these things are driving inflation, and so it's not a given that inflation will come down.”
Tangen said that concentration of American equities in large technology companies would also be a top risk to markets this year. High interest rates, high government debts, and geopolitical tensions could threaten markets in 2025, he said.
Norges Bank, a US$1.8 trillion (A$2.9 trillion) fund, holds stakes in almost 9,000 companies worldwide. It is the world’s largest sovereign wealth fund.
The fund also recommended this week that companies stop reporting their quarterly earnings, instead shifting to half-year results.
“Short termism can undermine the benefits of being publicly listed, and discourage companies with longer-term strategies from going or remaining public,” Norges Bank said in a report. “Executives feel increasing pressure to deliver short term results, and this, along with a high regulatory reporting burden, may have contributed to the significant decline in the number of listed companies over the past two decades.”
The number of companies listing on stock exchanges has declined globally, the World Economic Forum said last year. In the United States, listings fell by around 40% between 1996 and 2022.