---
title: "How should investment portfolios respond to trade wars? The answer from the world's largest sovereign fund: endure! Even if it means a loss of 600 billion"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/238663609.md"
description: "The CEO of the Norwegian Government Global Pension Fund believes that in the current situation, there is \"not much\" investors can do, and \"time can heal all wounds.\" However, some analysts warn that ordinary investors may not wait for the situation to improve, and worse, this could be a new era where, besides \"enduring,\" there are other options—gold and active trading"
datetime: "2025-05-04T03:20:16.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/238663609.md)
  - [en](https://longbridge.com/en/news/238663609.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/238663609.md)
---

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# How should investment portfolios respond to trade wars? The answer from the world's largest sovereign fund: endure! Even if it means a loss of 600 billion

In the face of a potential global economic recession and asset value shrinkage caused by the trade war, the world's largest sovereign wealth fund—the Government Pension Fund Global of Norway has adopted a strategy of "endurance."

In a recent interview, Nicolai Tangen, CEO of the Government Pension Fund Global of Norway, appeared unusually calm about the impending trade war, choosing to "do nothing" in the face of asset volatility.

Tangen stated:

> There is a hot war, a cold war, a tech war, and a trade war, all existing alongside a lot of fragmentation. In this situation, there is not much that investors can do.

**His strategy is to maintain a long-term investment perspective and achieve diversification. He believes that investors can generally trust that "time heals all wounds" and yields good returns.**

It is worth mentioning that about half of the fund's asset allocation is in U.S. stocks and bonds, primarily in equities. Nevertheless, due to the fund's exposure to the European market, its performance has remained flat this year. Tangen warned that if the global trading system were to split into different camps due to tariff barriers, **the fund could lose more than a third of its value, amounting to losses of up to $600 billion, as the economy is impacted and inflation rises.**

So, is it really reasonable to choose "to do nothing" in response to the trade war? Besides "endurance," do investors have other options?

## Is it really reasonable to choose "to do nothing" in response to the trade war?

James Mackintosh, a columnist for The Wall Street Journal, commented in a recent article that indeed, over the past century, broad stock investments have almost always outperformed bonds, cash, and inflation.

> Historically, after enduring the stagnation of the 1970s, the stock market crash of 1987, the bursting of the internet bubble, and the global financial crisis, those investors who held onto their stocks ultimately reaped rewards. The key to long-term investing is: do not frequently check the value of your portfolio, do not make arbitrary adjustments, just "ignore it," and eventually, everything will be fine. (Of course, don't forget to reinvest dividends.)

However, for those investors who cannot prepare "a freezer full of ice cream" in the office like Tangen, they may feel anxious about potential losses. They may also reasonably worry that things may not ultimately improve—**or that individuals do not have the luxury of time to wait for the situation to improve like a country does.**

**Mackintosh further warns that, worse still, this may be a new era.**

> Historically, in the 19th century, stocks were not a good investment, and bonds performed better. Edward McQuarrie, a retired business professor at Santa Clara University, found that stock prices at the end of the 19th century were below their starting levels, with the entire century's returns coming from dividends.
> 
> Given President Trump's call to revive the tariff policies of the gilded age, history may be repeating itself, and asset prices could fall significantly

## Besides "waiting," there are other options—gold and active trading

Although Tangen believes there is no alternative to waiting, Mackintosh argues that for investors looking to avoid the risk of a sudden collapse in global trade, there are two options: gold and active investment.

**Gold is a classic hedge against short-term inflation that tariffs may trigger. When prices fall, gold often performs well.** Compared to stocks, gold may be less affected in situations where trade disruptions lead to a decline in future productivity. It is a safe-haven asset that can benefit from geopolitical tensions arising from a multipolar world.

The problem is that gold, as a form of insurance, may drag down a portfolio if everything goes smoothly, much like paying an insurance premium. With gold prices having risen by about 60%, if all goes well, gold prices could significantly decline.

For Norway's sovereign wealth fund, active trading is not feasible due to its size, akin to a Norwegian oil tanker that is difficult to turn around. Most of the fund's assets track indices, with only a small portion adjusted based on Tangen's team's views.

**However, retail investors can be more flexible, which is both an advantage and a disadvantage. Mackintosh believes that active investment has the potential to outperform the market,** especially when investors flock to popular themes and drive prices to unreasonable highs.

However, timing the market requires a significant amount of time, necessitating investors to be willing to abandon their views and change direction when circumstances change. Additionally, simple mathematical principles should make it clear that not everyone can outperform the market, as for every buyer, there must be a seller. "Even smart investors with nearly unlimited resources often struggle to time the market," Tangen questions whether active investing can be profitable.

Mackintosh warns that the impact of Trump's tariffs on the economy may be much worse than stock pricing, suggesting that there could be more declines in the future.

Moreover, Treasury Inflation-Protected Securities (TIPS) are also an option, with a 10-year yield of 2%, which is very attractive. However, in a high-interest-rate environment, they may suffer losses for a longer period

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