The markets are all over the place. One minute they're happy, one minute they're worried. I know inflation underpins everything. Are the markets too optimistic about what we'll live through in the next 6 to 8 months?
Well, it's a very interesting question. You know, in a way, the world is splitting into two, and that means that we probably will see lower growth and there is a risk that we will see higher inflation. And so the market is very resilient given that backdrop, I think.
So which means that you're expecting maybe a correction. And are there parts of the markets that seem too sanguine at the moment?
Well, we've been saying for quite some time that we think it will be more difficult to make money going forward. And so I suspect with all the uncertainty that we are seeing just now, I think you would continue to see, you know, tough times.
So what's it like being in the markets? Do you worry? Is this an opportunity? What does it mean for how you position your portfolio for long term investments?
Well, I think the way to behave in the market now is just to be broadly diversified and very, very long term. You really need to put your long term hat on. And I think to do, you know, tactical reallocations and movements is very, very difficult because things move so fast. You know, when we last met in Davos, it looked like the US was going to be fantastic from a stock market point of view. And Europe, all the leaders we met from Europe were really, really depressed. Well, you fast forward a couple of months and the whole thing is just turned upside down. So it's very, very difficult to get these trends right.
But what does it mean longer term? Because actually it's unclear where the trade barriers exist to whether market pressure will make the Trump administration do a U-turn. So even three or four years, visibility is extremely difficult.
Yeah, no, absolutely. We really don't know how this is going to pan out. I think what is certain is that the long term trend of globalization, you know, growth, these kind of things, that will look very, very different going forward. So the easy money is not there anymore.
You have over 50% allocation into US assets. Does that change?
No. We are very happy with our US allocation. We have, you know, big holdings in Treasury and we have, you know, big holdings in the large companies in America. They are great companies and we love owning them.
I mean, Treasuries, are they a safe haven? What are they? Because I think, yeah, we think quite differently.
We think it's the safest place you can be still now despite the market move and some of the uncertainty.
Yeah, that means dollar stays the reserve currency.
Well, so there are other people who are better able when it comes to currencies than me. We, for instance, see the podcast with Ken Rogoff last week. So tune in to that one and find out.
I love that I'm speaking to like podcasters, podcaster. But Nicolai, overall, so 15% for example, Europe. Are you allocating more to Europe, you know, as opposed to other emerging markets?
So what we have, we have a very clear mandate from the Ministry of Finance, which in broad terms tell us where we should be invested. And what we do is we are very, very long term. We stick to the mandates and make just small allocation relative to that. And I actually think to have a long term plan and a long term mandate in these turbulent times is a very, very good idea.
But it's hard. I mean, when you look at, you know, for example, The Magnificent Seven, some of the tech stocks, I mean, you were slammed because of the market volatility and those so staying in takes quite a lot of courage.
Yeah. I mean, on the one hand, on the other hand, we are, after having been down, the market is now pretty much back to where it was. When you look at the global index and you know, the fund is pretty much where we were at the beginning of the year. So you just have to sit through some of this volatility. I think it's interesting when you look at our first quarter results, we were down some $40 billion. Now that's giving back only 10% of the combined gains of the two prior years. And, you know, markets don't go up in a straight line. You have to assume some volatility here.
They also don't go down the straight line. That's also great. Where do they go down first? Is there any indicator that you see for a bigger market correction?
Well, I think it's all depending on what's going on with the trade tariffs and whether you manage to solve the kind of the relationship between the superpowers. Right. We are seeing impact now in terms of incoming container traffic into the U.S. and so on. So it starts to have some real, real economic effects.
Nicolai, when you say, I mean, we started the conversation by saying actually there's a split, right? There's a fragmentation around the world. What does that mean for tech stocks? Why are you so still invested in them, do you think?
