Norges Bank Investment Fund’s Nicolai Tangen says this year ‘has been surprisingly not terrible’

In January, you said the best thing to do was the opposite of everyone else: sell US tech stocks, buy China. Is that also what you’ve done in recent months, and do you continue to be more bullish on China and bearish on the US? We have a pretty strict mandate. It’s not like we change geographical allocation often, because it is in the mandate. We were down 0.6% in the quarter. That’s $40 billion, which is less than 10% of the combined increase in the fund in the prior two years. We have big holdings in Europe, holdings in bonds. Indices were down temporarily, and they bounced back significantly. It was more in tech than in other sectors. And we’re a bit underweight there. People think that the year so far has been terrible. It has been surprisingly not terrible. We have stress tests, when you have disentangling of the superpowers in the world [our models project a worst case scenario of] a 35% decline in the markets. But the question is, is that what’s happening already? 

Markets have been impacted very much by political decisions, especially by the Trump government. Can you comment on that? We observe that trade barriers are not good for the market. That decoupling of the superpowers is generally not good for trade or growth or inflation.

Europe has had a subdued economic and stock market performance for many years, and especially since the war in Ukraine. What’s the outlook now? European growth depends very much on what’s going on in America. Germany is going into negative growth numbers. It depends so much from industry to industry. SAP is doing well. Each industry has got their characteristics. If you’re a German car manufacturer, it’s different from a French luxury goods company.

Has your approach to ESG changed? On our side there has been no change. We continue to be invested in the large integrated energy companies. And we continue to buy renewable infrastructure assets. We have portfolio managers—some people have been weighing up these things. Some others haven’t.

What is the most promising use of AI at the fund? We believe we improved productivity by 15% last year, and we can do even more this year. You see how it helps to write code. We monitor risks across 9,000 companies across the world, and we can do that in real time. Before it could take days, now it takes minutes. We have a risk department that sells down positions with high risks as an outcome.

Looking at the world today, what is your overall outlook? It’s an incredibly interesting time. Big changes in the world, big changes in technology. It’s a fun time to be alive. I’m not even joking. Some people are depressed about what’s going on in the world. Or you can put on your student hat, be amazed, try to understand what is going on and make the best out of it. Grateful people have a better life. — Peter Vanham

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Contact CEO Daily via Diane Brady at diane.brady@fortune.com

Top news

U.S. and Ukraine sign deal for minerals. Kyiv and Washington will invest and share 50/50 in the development of critical minerals, oil and gas. Ukraine will determine which resources are developed. All profits from the first decade will be reinvested in Ukraine. And the U.S. will be able to count military aid to Ukraine as its share of the investment.

A win for Zelensky. At first glance, the deal appears to be advantageous for Ukraine. It gives the U.S. a material stake in the future of the country. It also sets the stage for further military aid from the U.S., such as air support, although that is not guaranteed. Most obviously, the deal complicates the battlefield for Moscow by potentially placing U.S. assets in Russia’s firing line—which might make Putin think twice about further incursion in the East.

The Russians continued to bomb Ukraine. Two dead in Odesa overnight.

Tesla denies its directors considered life after Elon Musk. “Board members reached out to several executive search firms to work on a formal process for finding Tesla’s next chief executive, according to people familiar with the discussions,” the WSJ reported. But Tesla said this morning, “This is absolutely false (and this was communicated to the media before the report was published).” Tesla stock fell on the news.

Tariff frontrunning shrinks U.S. GDP. The U.S. economy contracted by 0.3% largely because companies advanced their orders for imports to beat President Trump’s tariff deadline. It’s a statistical quirk: Imported goods are discounted out of the GDP calculation but added back later when sold domestically. Irony alert: Trump’s tariffs were intended to reduce imports but ended up increasing them.

Trump admits there may be a toy shortage at Christmas. When asked about the fact that 80% of all U.S. toys come from China, the president said: "Somebody said, 'oh, the shelves are gonna be open.’ Well, maybe the children will have two dolls instead of 30 dolls, and maybe the two dolls will cost a couple of bucks more." Context: There are currently no tariff deal talks ongoing with China.

Trump tariff architect speaks on China. One of the men responsible for building the Trump Administration’s tariff policy told audiences at the Hill and Valley Forum this week that he sees no “immediate change” to the tariff policy against China. The comments from Stephen Miran, chair of the Council of Economic Advisers, come as Trump renews calls for the Fed to lower interest rates to counteract tariff-induced costs.

Jensen Huang predicts AI factories across industries. At the same forum, Nvidia CEO Jensen Huang predicted that every company that makes any product, “so long as they move,” will eventually have a secondary factory that “builds and produces the AI.” Huang pointed specifically to machines like lawn mowers and cars, which could be completely autonomous in the future.

Possible pharmaceutical shortage. Meanwhile, Apollo Global Management’s chief economist Torsten Sløk wrote in a blog post on Wednesday that Trump’s tariffs could cause a shortage of pharmaceuticals. Around 95% of the ibuprofen and more than 90% of the hydrocortisone in the U.S. is imported from China.

Federal judge asks prosecutors to investigate Apple for possible contempt of court in “cover-up” of illegal fees charged for sales that take place outside the App Store.

The White House launched a news website that looks like the Drudge Report. If you like your headlines in ALL CAPS then this is the news service for you.

The markets

• The S&P 500 rose 0.15% yesterday, a seventh straight day of gains. S&P futures were up 1.20% this morning, premarket. The Nasdaq Composite was marginally down, hurt by Snap declining 17% after the company said it would be negatively affected by incoming trade tariffs. Japan’s Nikkei 225 was up 1.13% this morning. Australia’s ASX 200 rose 0.24%. The Stoxx Europe 600 rose 0.5% in early trading. Hong Kong, Taiwan, mainland China, and South Korea are closed for Labor Day. India is closed for Maharashtra Day.

From the analysts 

• EY on employment: “We expect the steep tariff increases and the surge in uncertainty and financial market volatility will result in … the unemployment rate rising toward 5% in 2025,” per Lydia Boussour.
• Wedbush on auto tariffs: “The auto tariffs in their current form add up to $100 billion of costs annually to the auto industry and will essentially get passed directly onto the consumer and clearly erode demand on Day 1 of tariffs,” per Daniel Ives and Sam Brandeis.
• Convera on consumer confidence: “Consumer confidence …  has taken a notable hit, with the worst reading since May 2020. The expectations index also hit its lowest level since 2011. The plunge in sentiment is largely tied to Trump’s global tariffs,” per George Vessey.
• Goldman Sachs on equities: “Risk assets have staged a partial recovery from their April 8 lows. For markets, the most immediate question is whether there is fresh downside to come. … it is likely true that we are past the peak of new tariff ‘shocks’, and possibly past peak policy uncertainty,” per Vickie Chang.

Around the watercooler

Private hiring slowed in April out of fear of tariff impacts. ‘Unease is the word of the day,’ ADP chief economist says by Sydney Lake

Trump slams Powell again, claiming he knows ‘much more than he does about interest rates’ by Alena Botros

Ford CEO says the automaker is so dependent on imports it ‘can’t even buy’ certain car parts in the U.S. by Chris Morris

IDEO picks former partner Mike Peng to reinvent the storied home of ‘design thinking’ for the age of AI by Clay Chandler

Donald Trump Jr. plans to open an exclusive new Beltway club dubbed ‘Executive Branch’ catering to the wealthy by Christiaan Hetzner

CEO Daily is compiled and edited by Joey Abrams and Jim Edwards.