At the time of writing, there is actually genuine belief that the two-week ceasefire deal in the Middle East will hold. Markets are drawing a loud sigh of relief after a month of large losses across a range of asset classes and geographies.
Stocks fell in reaction to sharply higher prices on oil, gas and energy-intensive commodities like urea, likely to weigh on global growth. And bonds fell as expected inflation rose in response to these commodity price hikes.
To wit: The MSCI World Index was down by 5.6%, while the STOXX Europe 600 lost 7.6%. Even the Bloomberg Global Aggregate returned -3.1%, its worst month since 2024. The S&P US Treasury Bond 10+ Year Index lost 3.9%, underscoring the risk in long-duration fixed coupon bonds. One may still assume that credit risk has added little to this number.
Not all was dark, though. The Norwegian benchmark index rose by 9.3%. Given its high exposure to energy – roughly one third of the index – this is hardly surprising. Brent crude ended March at $118.35 per barrel, an increase of almost $46 in but one month. No wonder, given that many experts describe it as the most significant supply impact ever – above and beyond the 1973 oil crisis.
How can one possibly navigate such events? How can a mere chief economist, or a fund manager, hope to foresee the unfolding of global events and the appearance of geopolitical shocks?
The simple answer: They can’t (at least, I can’t). We can always hope to discern President Trump’s next moves somehow, but absent proximity to the White House or his inner circle, I’d say it’s a vain hope.
However – we do have the option of preparing for such events – or in fact a range of eventualities – in advance. Case in point: For clients with a balanced mix of Norwegian and global stocks, the blow in March was indeed softened. And for an asset manager, putting together such a balanced portfolio is at the core of the job. That’s strategy. Trying to outguess geopolitics may be described as tactics, but it’s a really long shot.
Let me then quote the Chinese philosopher Sun Tzu (c. 544–496 BC), writing in The Art of War:
“Tactics without strategy is the noise before defeat.”
Finn Øystein Bergh joined Pareto in 2010, the first years in Pareto AS before joining Pareto Asset Management in 2015. He has previous experience as a journalist, chief economist and later managing editor in the financial magazine Kapital. Finn Øystein Bergh holds an MSc in Economics and Business Administration, MBA, cand. polit. (an extended master's degree) in political science and cand.polit. in economics. He writes the financial blog Paretos optimale, and has published several books on economics.
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