In May, I had the good fortune to cross the pond to attend my daughter’s graduation in Connecticut. Over ten somewhat emotional days, I was able to spend time in New York, New Haven, and on Martha’s Vineyard. In every location I found much the same; there was little discussion of President Trump and his latest utterances from the Oval Office. This stands in stark contrast to my experience as a consumer of European news media, where not a moment goes by without column inches filling the front page with the latest Trumpism. I wonder why this is. Are my American friends and acquaintances in denial or is the European media a victim of its own bias and prejudice? You’ll forgive me if I don’t try to answer this, but I will say that sometimes the noise itself is not the thing. Perhaps our analysis in Europe is too obvious, too one dimensional, too skewed to our own cultural norms. Perhaps Americans, with their gumption and their dream are better placed to drive on through the distractions of a second Trump presidency; perhaps getting on with the business of business is the best action.
It's much the same with investing; sometimes the noise is not the thing. As Alexandra Morris writes in her May update, despite a rollercoaster 2025, global markets are broadly flat year-to-date in dollar terms. There have been shifts, of course, but volatility is not inherently negative, and it does offer substantial opportunity for more patient investors, like SKAGEN. So, while many self-proclaimed experts will have us believe that American exceptionalism is over, and that defence and European stocks are the only thing, it may just be the greatest bargains with the best medium to long-term upside are sitting there in front of us in plain sight.
One outcome of the first half volatility has been a return to form for active and value investing. This has seen SKAGEN’s equity funds outperform their respective benchmarks by a good margin year to date.
The most important investment decision of all
I probably shouldn’t be saying this, but the most important investment decision that any of us will make is the decision to invest, then the amount, and only then where we put it. Having lived my sixtieth year, my attention is occasionally drawn to the size of my pension pot and the standard of living in retirement that I want to have.
There are many basic rules of pension saving – just ask Perplexity or Copilot or your favourite AI agent. Whether you favour a target pot size – traditionally ten times your average working-life salary – or an annual pension saving rate (usually 12.5% to 15% of annual salary) or the “half your age” rule (saving a percentage of your annual salary equal to half your age), the choice largely comes down to personal preference. However, income replacement is the acid test. Regardless of your chosen method, the conventional target is to aim for a retirement income equal to 50% to 70% of your current working income – provided you do not expect to retire saddled with debt.
The obvious corollary of this, is to start early. It saddens me just how many thirtysomethings pay lip service to their pension and long-term saving. And here in Norway the situation is no less acute, with too many imagining that a comparatively generous state pension and the oil fund will somehow fill the gap – they won’t. If you are not already saving for retirement, on top of the generally basic defined contribution corporate pensions, and urging yours to do the same, then I strongly recommend that you do.
And if investing is the first decision, the logic follows that one should remain invested despite the shorter-term movements of the markets. Mistakes are mostly made at the point of redemption, usually when the sentiment in a falling market triggers investors to lock in losses – as we have observed from some clients in the first half. SKAGEN’s approach, and advice, has always been to consider risk as the permanent loss of capital. That way a falling market can present more opportunity than threat for those with the wit and the patience to think clearly and long-term.
God sommer
Finally, for those seeking inspiration, my summer books this year are mostly fiction and include the following:
The Far Pavilions by M M Kaye – This is a book from my youth. It tracks the epic adventures of British Officer during the British Raj in 19th century India and perfectly describes the challenges of a man caught between cultures. I sometimes think it contributed to my decision to become a Gurkha officer, and there are times even today when I find myself caught between cultures. I loved it a lifetime ago and I am looking forward to rereading it. India is much in the news nowadays and I was surprised to read that domestic inequality has now eclipsed that of the period of the Raj – not that I am advocating any lessons from that period.
The Night of the Scourge by Lars Mytting – the author and I exchange mails occasionally and I am a huge fan of his work in translated form. This is the third volume in the remarkable Sister Bells Trilogy, a series that spans eighty years and three generations. An absolute must for lovers of Norwegian folklore and mythology combined with the drama of the modern novel.
The Place of Tides by James Rebanks – Rebanks is a Cumbrian sheep farmer, and a friend of Lars Mytting. In this, his latest book, he writes evocatively about the life of an Eider-woman in Northern Norway while tracking his own journey of self-knowledge and forgiveness.
AI 2027 by Daniel Kokotajlo, Scott Alexander, Thomas Larsen, Eli Lifland, and Romeo Dean – this readable collaborative paper presents a comprehensive and detailed scenario forecast of the future of AI. It starts in 2025 and projects the rise of AI agents by 2026, the complete automation of coding in early 2027, and the intelligence explosion in late 2027. It has two branches, one ending in AI takeover and another ending in utopia (sort of). It comes strongly recommended for those, like me, that struggle with the truth and the fiction of the ongoing AI revolution.
It only remains for me to wish you all a restful summer with family and friends.
God Sommer