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"40% Losses." Focus writes:


The Norwegian sovereign wealth fund is seen as a role model by many German investors. Its head Nicolai Tangen is now warning of the serious consequences of inflation for many investors. He expects losses of up to 40 percent.

Nicolai Tangen calls the current economic situation a "new era." The head of the Norwegian sovereign wealth fund had warned early on about inflation, as well as the serious consequences. Putin's invasion of Ukraine is now doing its bit to keep returns down for investors, he said. "The Ukrainian war is increasing price increases," he told the "Wirtschaftswoche".

He uses a comparison to illustrate how precarious the situation is for savers: over the past 25 years, investors in the Norwegian sovereign wealth fund could expect an annual return of 6.6 percent. "That's no longer possible in the next ten years," he warns. "Investors should be happy if they make any profits at all," he concludes.

Tangen expects prices to remain high - possibly even rise further. "Prices could rise even faster than before because many factors are driving inflation," he explains. For example, globalization and free world trade, which once led to low prices, are being reversed. At the same time, there is a shortage of labor in many sectors. In addition, prices for energy and raw materials are rising.

Accordingly, he is critical of the fact that the European Central Bank (ECB) had only held out the prospect of raising interest rates in the euro zone for the summer: "In my opinion, the ECB is lagging behind," Tangen said. He said he was puzzled by the decision to leave interest rates at the current level for now. Rising inflation will lead to rising interest rates sooner or later anyway, he said.

The head of the Norwegian sovereign wealth fund paints a gloomy scenario: Companies and consumers would then be able to buy fewer goods and would find it more difficult to obtain loans for certain goods. This makes it more likely that high inflation will be coupled with low economic growth - "and that in a phase in which valuations are already high, in which stocks and bonds are already expensive."

Such a situation is called stagflation. "If we suffer losses in all asset classes in such a situation, we face losses of up to 40 percent," Tangen further warns. Stress tests showed that.
Investors must be prepared

So investors are facing extremely challenging times. What this new "era" could mean for investment strategies was recently explained by expert Ingo Mainert to FOCUS Online: "Old virtues do not have to be fundamentally thrown overboard, but the current situation requires new approaches in some cases," he wrote in a guest article at the beginning of April.

Translated with www.DeepL.com/Translator (free version)