Investors should prepare for tougher times ahead rather than expect global markets to repeat the strong gains seen over the past six months, Nicolai Tangen, CEO of Norges Bank Investment Management, told CNBC.
“I don’t think we’ll have a repeat of the last 30 years going forward; I think there’ll be tougher times ahead,” Tangen said.
The warning comes after Norway’s $2.3 trillion sovereign wealth fund delivered a record first-half profit of nearly $185 billion. NBIM returned 12.95% in the first six months of the year, despite a 2.6% decline in its equity portfolio in the first quarter followed by a 15.98% jump in the second.
Tangen said the strength of markets had surprised him given the scale of the challenges facing the global economy, including the U.S.-Iran war, trade barriers, inflation and wider geopolitical tensions.
“If you went back two years and told me this is going to happen with the Hormuz strait, trade barriers, geopolitical tensions, and so on, I would never have thought that the market would be as resilient as it is,” he said.
However he cautioned that resilience should not be mistaken for a guarantee of continued high returns.
“For sure, we should not be expecting the same kind of returns going forward as we’ve seen over the last six months,” Tangen said.
Stay invested, stay diversified
Despite his cautious outlook, Tangen said investors should not respond to volatility by abandoning their investment strategy. “I would say the way to make money is one, be very, very long term — don’t change your strategy — and be well diversified,” he said.
For NBIM, diversification is built into the fund’s structure. The fund owns around 1.5% of all companies globally and roughly 3% of listed companies in Europe, giving it exposure to markets across the world. “We typically are invested in everything, which is very good when you have periods like the first half of this year,” Tangen said.
That approach also means the fund will take losses when markets fall. “For sure, if there is a downturn in the markets we will lose money,” he said. “We participate in the upturns and the downturns.”
Semiconductors powered the gains
The fund’s strong first-half performance was helped heavily by semiconductor stocks. Samsung, SK Hynix, TSMC, ASML, Intel and Nvidia were among its best-performing holdings. “Chips, chips, chips, chips,” Tangen said at a news conference while highlighting the fund’s top-performing stocks.
He acknowledged that the gains were unusually concentrated but said NBIM would not move to take profits or significantly rebalance its holdings. The fund’s broad, index-near strategy means it remains invested across markets rather than trying to predict which stocks or sectors will outperform next.
Markets remain resilient despite volatility
Global equities have endured repeated bouts of volatility this year as investors reacted to artificial intelligence spending, the Iran war, inflation and central bank policy.
However markets have continued to climb. Wall Street’s major averages are up more than 10% year to date, while Europe’s Stoxx 600 has gained more than 11%. South Korea’s tech-heavy Kospi has risen more than 50%.
Tangen said the ability of companies and markets to absorb uncertainty had been striking, but he believes investors should now temper their expectations.
“It’s more difficult than it looks to make money,” he said, arguing that staying diversified and investing for the very long term remains the better strategy.