IF you’re cautious about where stock markets are headed next, you’re in good company. Norway’s sovereign wealth fund – the largest in the world – has reported it had a challenging time in the first half of the year and its chief executive Nicolai Tangen is unconvinced the bear market for shares is over quite yet. So what can we learn from this?

Norway’s sovereign wealth fund was started in 1996 in order to invest the proceeds of a burgeoning North Sea oil industry into a wider spread of assets, to the benefit of the welfare state.

Today, the $1.2 trillion fund famously hedges its bets by investing globally in shares, bonds and other assets. Historically that’s proven a very good strategy, but it didn’t work quite so well between January and June.

Fairly unusually, shares and bonds fell together, as inflation, rising interest rates, the war in Ukraine and recession fears weighed on most markets around the globe.

Against this backdrop, the fund saw its value slide by more than $170 billion. Holdings in the technology sector and stocks sensitive to changes in the economy including consumer cyclicals fared the worst while, ironically, perhaps, investments in the energy sector and gas were among the best1.

This news comes at a time when the debate about where markets are going next has rarely been more divided, even among professional investors. After two months of rebounding share prices, some say markets have turned a corner. Others believe all we have seen is a temporary let-up in a longer downturn.

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