The CEO of Norway's sovereign wealth fund, Nikolai Tangen, said that the disintegration of the global economy represents the greatest risk threatening markets today, amid growing signs of slowing growth and accelerating inflationary pressures.
The Norwegian fund, the world's largest with total assets of $1.8 trillion, invests Norwegian oil and gas revenues in stocks, bonds, real estate, and renewable energy, and owns an average of 1.5 percent of listed stocks worldwide across approximately 9,000 companies.
In an interview with Reuters, Tang explained that the "decoupling" between major powers like the United States and China is exacerbating global tensions, adding, "We are facing a hot war, a cold war, a trade war, and a technology war. The world is full of friction." He warned that this environment is leading to lower growth, higher inflation, and increased economic uncertainty.
Tangen noted that the worst-case scenario for the fund, according to its stress tests, is a fractured world that could lead to the loss of about a third of the value of its assets.
While markets have experienced significant volatility, their performance has remained relatively stable since the beginning of the year, which Tangen described as ironic, saying, "If I had been told in advance that these events would occur, I would not have expected the markets to remain unchanged."
Corporate forecasts have also become more uncertain, with Tangen noting that many companies are now avoiding issuing future forecasts amid global uncertainty.
Regarding corporate resilience, he explained that organizations capable of withstanding price pressures or with flexible supply chains will be most resilient. However, he declined to identify specific sectors or companies most vulnerable to the ongoing trade war.
From an investment perspective, the fund remained underweight in equities in general, and the technology sector in particular, over the past year, while strictly adhering to its parliamentary mandate.
It's worth noting that Tangen was reappointed last month for a second and final five-year term. In his vision for the next phase, he emphasized the importance of continuous improvement, saying, "I strive to improve performance by 1 percent in all areas, all the time."
Regarding the use of artificial intelligence, Tangen revealed that over the past three weeks, the fund's employees have been able to accelerate the monitoring of news related to companies based on specific risk criteria, a process that previously took days and now takes just ten minutes.