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All of us, at some point, must confront our mortality. So, too, must investors prepare for the demise of a bull market that began in the depths of the financial crisis in 2009.

Yes, predictions of the end of this record run have been made before—and have been proved wrong. The rally has so far seemed almost indestructible, thanks to stable economic growth and the Federal Reserve’s easy-money policy.

But many market strategists and economists see powerful forces converging that could finally trip up the bull. For one, the economy has been juiced by the tax cuts and fiscal-spending package that Congress passed at the end of 2017—a stimulus that should last another year or so. Just as its effects are fading, the Fed will be continuing to push interest rates higher and shrinking its $4 trillion balance sheet.

Put them together and you have a drag big enough to slow the economy, while stamping a bright expiration date on the bull market: 2020.

And it isn’t just permabears who are gloomy of late. Ben Bernanke, the former chairman of the Federal Reserve, recently said that after two years of stimulus, “in 2020, Wile E. Coyote is going to go off the cliff and is going to look down.”

Even less-pessimistic economists and market watchers acknowledge that economic expansion will slow in 2020, while corporate profits, though still increasing, will do so at a slower pace than they had previously. Global economic growth could also feel the pinch if the European Central Bank begins raising interest rates toward the end of 2019, as it has suggested it might. These conditions are far different than what has existed in the bull market.

There’s no denying this one is getting long in the tooth. The average postwar bull market gained 161% over 1,821 days. This one, at 3,400 calendar days, is already the second-longest on record, lagging behind only the 4,494 days during the marathon run from 1987 through the peak of the tech bubble in March 2000. The S&P 500 has gained 302% since its bottom in March 2009, the second-longest run on record. During the 1987-2000 bull, the S&P 500 rose 582%. And while bull markets don’t die of old age, each day brings a reckoning that much closer.

Why the Bull Market Could End in 2020

“Like the human body, the market becomes less resistant to shocks and viruses the older it gets,” says Christopher Smart, head of macroeconomic and geopolitical research at asset manager Barings.

While a correction from its Jan. 26 highs has removed some of the market’s most egregious excesses, signs of investor complacency abound. The Cboe Volatility Index, also known as the VIX, remains below its long-term average around 20 times, and investors continue to put money into mutual and exchange-traded U.S. stock funds, even as they have fled other markets. And for investors betting that the diversity of their index ETFs will save them, the Leuthold Group’s chief investment strategist, Jim Paulsen, notes that the weight of defensive sectors in the S&P 500 has dropped to 15%, an all-time low. “Investors should be aware that defense has left the building,” Paulsen warns.

If nothing else, it’s time for investors to think about the types of companies they own, and to begin shifting away from the riskiest and most indebted toward those better-positioned to withstand a downturn. And while it may reduce short-term returns, there’s nothing wrong with holding a little extra cash to tamp down a portfolio’s volatility and deploy when stocks do fall. Because the market always falls, eventually.

To understand why 2020 should loom large in investors’ vision, keep in mind the reasons that the past nine years have been so good. Some might call post-financial-crisis growth in the U.S. lackluster; it has also been remarkably consistent, never climbing by more than 2.9% or by less than 1.5% in any calendar year since 2010. And inflation has been subdued, as well, creating the Goldilocks environment that was neither too hot nor too cold.

Why the Bull Market Could End in 2020

The latest fiscal stimulus—the tax cuts—changes that. Congress passed $1.5 trillion of them over a 10-year period, while also increasing spending by some $300 billion over two years. The Peterson Institute for International Economics puts the total impact at an additional 0.5% of gross domestic product by 2020.

Companies have used that cash to repurchase shares, increase dividends, buy competitors, and invest in their businesses. All of that activity looks set to have a big impact, though the question remains how big. Economists expect the U.S. economy to grow at a 2.9% clip in 2018, up from 2.3% in October. And that economic growth has also translated to a big boost in earnings projections, as corporations are expected to see profits rise by 21% in 2018 and 10% in 2019.

Like any artificial high, the good feelings won’t last forever. By the end of 2019, the last of the fiscal intoxication should have worn off, and the hangover could begin. Economists expect the U.S. economy to expand by 1.9% in 2020, and earnings to increase by 10%.

“The tax stimulus is designed to be very front-loaded in the lift it gives to economy,” Morgan Stanley chief U.S. economist Ellen Zentner says. “You have to deal with the hole on the other side.”

The stimulus, however, isn’t occurring in a vacuum. The Fed is already raising interest rates, and is doing so at a faster pace than some investors had counted on. At its current pace of a hike every three months, the federal-funds rate should hit a range of 3.25% to 3.5% by the end of 2019, up from 1.75% to 2% currently.

At the same time, the Fed is shrinking its behemoth balance sheet. That means monetary policy could be hitting its tightest levels just as the impact of the government stimulus begins to wear off.

Alan Ruskin of Deutsche Bank argues that fiscal stimulus has restored the “arc” to both the economy and the policy cycle. The arc refers to the rise above trend growth, followed by the decline back below it. The arc of economic growth is also mirrored in monetary policy, which should follow the same path as the economy strengthens, and then weakens.

That arc, however, is nowhere in sight. The Fed’s “dot plot,” which tracks where each member of the Federal Open Market Committee thinks rates will be over three years, suggests that fed funds will hit 3.25% to 3.5% before a gentle easing. The market, meanwhile, is pricing in rates hitting 2.6% at the end of 2019 and going sideways from there. Those paths are unlike any seen before. “What’s priced in has no modern monetary policy precedent,” Ruskin says.

Market indicators are also pointing toward 2020 as a year of reckoning for the stock market. Look no further than the so-called yield curve—that is, the difference in returns between short- and long-term Treasury securities.

Why the Bull Market Could End in 2020

In good times, the longer-term yield should be higher than the shorter because it means a bank can borrow at the lower short-term rate and make money lending at the higher longer-term one. When short-term yields rise above long-term ones, there’s no incentive to lend, and that “inverted yield curve” has typically preceded a recession by six to 24 months.

The yield curve hasn’t inverted yet—but it’s getting close. The two-year Treasury’s yield was at 2.524% on Friday, while the 10-year’s was at 2.844%. That 0.3195 of a percentage point difference is the narrowest since the financial crisis ended. If the Fed continues to raise rates at its current pace, the yield curve is likely to be flat by year end, says David Ader, chief macro strategist for Informa Financial Intelligence, and to invert during 2019’s first half. “That would point to recession in the second half of 2019 or early 2020,” he explains.

An inverted yield curve acts as a market signal, as well. Charlie Bilello, director of research at Pension Partners, notes that since 1956, the S&P 500 has dropped an average of eight months after an inversion of the one- and 10-year Treasury yields, though it took 21 months from an inversion in 2006 to the stock market’s peak in 2007. “That’s a long time to wait, exposing just one of the problems in using the yield curve to time your stock market exposure,” Bilello adds.

While 2020 may be pointing to the edge of a cliff, a lot could happen by 2020 that could either extend the cycle, or end it sooner.

The brewing trade war between the U.S. and its trading partners is the most obvious, as escalating tensions could negate the stimulus boost—and cause a selloff long before a recession. The S&P 500’s 2.2% decline during the past two weeks suggests that these worries are already having an impact.

On the other hand, the Fed might decide it would be better off slowing rate increases in light of global tariff turmoil. There’s even a possibility that the economy, which has survived so much since 2009, just keeps soldiering on—and lifts stocks with it.

“The bull market will last as long as the economy expands,” says Ed Yardeni, chief investment strategist at Yardeni Research. “I don’t know anything today that leads me to put a time frame on when this bull market ends.” That means stocks’ path to 2020 could be as rocky as 2018’s has been, or that equities could see one final melt-up before it all comes crashing down.

Investors need strategies to handle both potential scenarios.

The best way to do that could be to focus on high-quality stocks, says Brian Belski, BMO Capital Markets’ chief investment strategist. He defines quality stocks as those with an investment-grade credit rating, lower earnings-growth volatility than the S&P 500, higher return on equity than the median stock in the benchmark, and a larger-than-average cash position.

Such shares have performed quite well in all market periods. High-quality stocks have averaged a 13% gain annually since 1990, versus 7.7% for the S&P 500, according to Belski’s data. And they’ve fared even better in rocky markets with above-average volatility, rising an average of 4.2% annually, compared with 2.9% for the S&P.

“Our work suggests these stocks not only are well suited for volatile market periods, but also are an attractive long-term investment strategy,” Belski says. “As such, we believe it would behoove investors to focus on this sort of strategy as markets continue to digest what has become an increasingly complicated investment landscape.”

Stocks that meet Belski’s requirements include exchange-traded fund titan BlackRock (BLK), biotech giant Biogen (BIIB), Costco Wholesale (COST), and United Technologies (UTX).

In a similar vein, David Kostin, Goldman Sachs’s chief U.S. equity strategist, has been recommending stocks with strong balance sheets, which tend to outperform when the Fed is raising rates and monetary conditions tighten. That should pay off, regardless of whether the economy continues to expand at a strong pace, or if growth slows and heavily indebted companies struggle to cover their interest payments, Kostin observes.

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“Strong balance-sheet stocks appear primed for outperformance whether economic growth remains strong or falters,” he explains. Stocks included in Goldman’s Strong Balance Sheet Basket include Facebook (FB), Intuitive Surgical (ISRG), Monster Beverage (MNST), and Verizon Communications (VZ).

But it also pays to remember that bear markets are inevitable—and not the worst thing that can happen, as long as an investor is prepared. The S&P 500, after all, dropped 57% from peak to trough during the financial crisis, but investors who held on through it had recovered their losses by the end of March 2013. The worst damage was suffered by those who couldn’t take the pain and sold near the bottom; they never made their money back.

For investors who may not have the fortitude to hang on through a run-of-the-mill correction, let alone a real bear market, Michael O’Keeffe, chief investment officer and head of investment strategy at Stifel, recommends holding a bit more cash. “Sell a little bit of your equities, and hold more dry powder,” he advises. “When the move occurs, you’re ready to redeploy.”

That sounds like good advice, especially now that it’s possible to get close to 2% on cash, a big increase since we last took the temperature of this bull market 10 months ago. With the market even longer in the tooth, that doesn’t look too shabby.

To make sense of investor enthusiasm, Bernstein media analyst Todd Juenger addressed one of the mysteries surrounding Netflix: “Seemingly everyone we encounter, be it professionally or personally, seems to already have access to a Netflix subscription. Yet, Netflix ‘only’ has 57 million paying U.S. subscribers.” Who doesn’t yet subscribe to Netflix?

Juenger commissioned a 1,000-person survey to try to get an answer. Based on responses, he estimates that Netflix has 141 million users, 68% of whom pay for the service. For nonpayers, the most frequent benefactor is another household member. He found that 82% of U.S. respondents ages 30 to 49 had access to Netflix, versus 44% of those 50 to 64, and 26% of 65 or older.

If the more youthful trend holds as viewers age, Netflix would pick up 17 million new subscribers in the 50 to 64 range and six million in the over-65 set. Those 23 million additions would eventually get Netflix near the top end of its long-term U.S. subscriber guidance of 60 million to 90 million. Juenger’s current forecast puts Netflix at 87 million U.S. subscriptions in 2030. He reminds clients that U.S. cable and satellite-TV subs peaked at 100 million.

Trade war fears spark second-largest weekly withdrawal since turn of the century

Increasing concern about the effect of a possible trade war between the US and China has forced investors in equity funds to head for the exits.

Investors pulled $29.7bn from equity funds in the week ended June 27, the second largest weekly outflow since the beginning of the millennium, according to data provider EPFR.

The retreat follows Washington’s move to impose tariffs on $50bn of Chinese imports. US president Donald Trump has also threatened to add tariffs to a further $200bn of Chinese imports if Beijing retaliates.

The withdrawals from equity funds have weighed on the US benchmark S&P 500 index which has retreated 4.8 per cent from its all-time high in January. At the same time, China’s Shanghai Composite has become a bear market, falling more than 20 per cent from its January peak.

In addition, the Chinese renminbi fell last week to its lowest level of the year amid worry that the tension over trade between Washington and Beijing might also lead to a currency war.

The deterioration in risk appetite evident in equity fund outflows is also illustrated by rising demand for US Treasury bills, viewed as one of the safest asset classes available. Bank of America Merrill Lynch noted that allocations to Treasury bills among its private client allocations had surged to a 10-year high.

Some investors see uncomfortable parallels between current market conditions and the 1998 Asian crisis, which coincided with the collapse of Long Term Capital Management, at that time the world’s largest hedge fund manager. The Federal Reserve responded by cutting US interest rates. Easier monetary policy helped fuel a price bubble in US tech stocks that burst in 2000 and led to widespread losses.

Berkshire Hathaway will net $1.7bn in dividend payments approved by the Fed last week

Warren Buffett’s Berkshire Hathaway is poised to net about $1.7bn in dividends after Wells Fargo and other banks in which he is a shareholder sailed through the Federal Reserve’s annual stress tests.

Calculations by the Financial Times, based on figures from Jefferies and Bernstein, show the renowned investor is set to be among the largest individual winners from the Fed’s decision to approve banks’ highest capital distributions since the financial crisis.

Berkshire is one of the biggest single investors in the financial sector globally. It is the number one shareholder in lenders including Wells, Bank of America and American Express, and has sizeable stakes in several others.

While some companies struggled with the stress test, which was tougher than in prior years — Deutsche Bank failed outright — Berkshire’s biggest banking investment, Wells Fargo, was an unexpectedly strong performer.

Wells was given the all-clear to make almost $33bn in dividend payments and share buybacks over the next four quarters, overtaking JPMorgan Chase at the top of the capital distribution league table.

Mr Buffett has continued to back Wells through a scandal over its creation of millions of sham accounts. He said this year that while the bank had failed to address its compliance problems quickly enough, chief executive Tim Sloan had been “working like crazy to clean things up”.

The Fed placed restrictions on Wells’ expansion earlier this year, citing “widespread customer abuses”, but last week it permitted the bank to make aggregate distributions equating to 40 per cent more than its forecast annual earnings.

That would be the second highest payout ratio among 22 of the country’s largest listed lenders, according to RBC Capital Markets. The bank was a “notable standout” in the stress test this year and passed “with flying colours”, said John McDonald, analyst at Bernstein.

With a 9.9 per cent stake, Berkshire is in line for about $800m of dividends from Wells in the year ahead.

Bank of America is also due to boost payouts. The Fed signed off on its plan to raise its annual dividend by a quarter. Berkshire became its largest shareholder last summer after it exercised warrants to buy 700m shares — putting it in line for about $400m of dividend payments in the year ahead.

American Express was forced to rein in its initial capital distribution plan, although it received the Fed’s approval for an 11 per cent rise in its dividend.

Goldman Sachs was ordered to keep aggregate dividend and share buybacks broadly in line with previous years after some of its capital metrics fell shy of requirements in the stress tests. Still, Berkshire has a smaller position in Goldman, where it is the seventh-biggest shareholder.

Berkshire is the biggest shareholder in US Bancorp, the seventh largest bank in the country by assets, which got the green light for a 23 per cent dividend increase. And it is the second-largest investor in Bank of New York Mellon, which is able to increase its dividend 17 per cent.

Trian Partners suffers losses on General Electric and Procter & Gamble this year

Trian Partners, the hedge fund run by veteran activist investor Nelson Peltz, has been dragged into the red this year by share price declines at two of America’s largest companies.

Trian ended the first half down almost 2 per cent, according to a person familiar with the result, with its stakes in General Electric and Procter & Gamble both down by a double-digit percentage.

Mr Peltz is telling investors to keep the faith, however, since Trian has board seats at both companies through which it is trying to push for improvements.

A jump in GE’s shares last week, in the wake of its announcement of a partial break-up plan, did little to reduce the sting of losses. Trian took a $2.5bn stake in the company in late 2015, when shares were trading at about $25, and said at the time that it envisioned they could be worth as much as $45 by the end of 2017.

GE ended last year below $18, and by the close of trading on Friday, they were down a further 22 per cent to $13.61.

Trian sold off about one-sixth of its position in late 2015 and early 2016 at about $30, but the share price collapse since then means GE now counts as one of Mr Peltz’s most disastrous investments. His stake is now worth just under $1bn.

Meanwhile, Procter & Gamble, the fund’s largest holding, is down 15 per cent this year in the face of margin and market share pressures across the consumer goods industry.

Another company in Trian’s seven-stock portfolio, the industrial group Pentair, is also down sharply this year — by 11 per cent at the end of June. Partially offsetting the losses, the fund’s second-largest holding, the food company Sysco, is up 12 per cent, and its stakes in Bank of New York Mellon and burger chain Wendy’s are also in positive territory.

GE has been unpicking the legacy of its former chief executive Jeff Immelt, who spent nearly two decades on an acquisition spree until a sharp decline in its operational performance accelerated his departure.

Last week, the company took a major step towards slimming down when it announced it would spin off two of its largest divisions — its healthcare division and its stake in Baker Hughes, the oil services company.

Trian said it was in favour of the company’s new approach. “Trian supports the strategic initiatives announced by GE and believes that these initiatives will create substantial value for shareholders,” she said.

Trian typically holds its activist stakes for many years, so insiders say they are confident of improving performance over the long run. After a long fight for a board seat, Mr Peltz finally became a P&G director in March, while Trian partner Ed Garden joined the GE board in October, shortly after John Flannery replaced Mr Immelt.

Trian’s near-2 per cent decline this year compares to a 1.7 per cent rise in the S&P 500 index of US stocks in the first half.

The GE share price performance has been one factor in Mr Peltz’s fall from the upper tier of best-performing activists. His fund, which manages about $12.5bn, was beaten by the average of its peers in 2017 for the first time in at least five years. According to HFR data, overall activist returns have also been positive this year, up 0.7 per cent to the end of May.

Mr Peltz is now looking to follow a wave of his peers to Europe in search of more opportunities for activist campaigns. According to a person familiar with his plans, Trian is planning to raise more than $1bn for a fund that will be listed in London later this year.

In Italy and beyond, far-right populists’ ambition is to destroy the bloc from within

The EU faces two existential challenges: one from Donald Trump and one from Matteo Salvini, the leader of Italy’s far-right League. The threat posed by the US president is obvious, direct and brutal.

Trade tariffs for European cars will probably happen. The EU is paying a price for its over-dependence on the US as an absorber of export surpluses and for external security.

But the threat posed by Mr Salvini may be more potent if not quite so direct. Since he agreed to join a coalition with the Five Star Movement, he made two politically cunning decisions: the first was to suspend the talk about an Italian euro exit. The second is to use his role as interior minister as a bully pulpit with terrifying success.

Italy is playing a good-cop, bad-cop game with the EU. Mr Salvini is the bad cop. The good cop is Giuseppe Conte, Italy’s prime minister. He got a bad deal from the European Council, which agreed a few minor measures well short of what he demanded. The EU committed itself to setting up refugee camps inside its external borders and will devote more resources to protecting the periphery. And boats from non-governmental organisations will find it harder to pick up refugees.

But Mr Conte did not get anywhere with Italy’s central demand to reform the Dublin regulation — the rules that assign responsibility for refugees to the first EU country of arrival. Mr Salvini reacted with scepticism to the outcome of the summit, not surprisingly. The crisis is not over. All the difficult decisions on immigration have yet to be taken.

For the EU’s populists, this is fertile breeding ground. One of the reasons the leftist Greek insurrection against the EU’s establishment failed in 2015 was a lack of allies. The populists of the right have a different strategy. They work from inside the EU by forming alliances. Their ambition is to take over the EU institutions, and destroy the EU from within. Mr Salvini has his eyes set on the European elections in May 2019 and his chances look good.

It is possible that the main centre-left and the centre-right groups in the European Parliament will be swept away by two challengers. One of them could be a new pro-European liberal group, led by Emmanuel Macron, French president. The other would be an assorted group of populists and nationalists. They could stage a reverse takeover of the European Peoples’ party, the centre-right group. Or huddle together in a separate European party. Either way, they will find ways to assert their influence.

One often hears the argument that the populists in Italy, Austria and Bavaria have incompatible interests. The Germans want to send refugees back to Italy. The Italians want to dump theirs on Germany. And Austria does not want immigrants to pass through in either direction.

But the reference to competing interests misses the more important point that the populists are united in their wish to renationalise policy. This could happen in two ways. They might win the European elections, giving them a say over the next Commission president and a hand on the levers of power in the EU’s institutions. Or the centrists might capitulate and agree to a partial re-nationalisation of immigration policy, with all the negative implication this would have for open borders. A comprehensive EU-wide migration policy would be the best solution of all. But it is the least likely outcome, nevertheless.

I also expect that Italy, with Mr Salvini as back seat driver, will become more assertive in other areas and challenge Franco-German dominance in all aspects of EU policy. In the past, Italy was driven by fear of isolation. The country often agreed to legislation that was against the national interest. Examples of this self-sacrifice include the rules underpinning the European Stability Mechanism or the bank recovery and resolution directive.

What makes Mr Salvini’s threat to the EU’s established order so potent is his fearlessness. He is the first modern Italian politician without an emotional need to be among friends in Davos or Brussels. And while the more experienced EU leaders managed to ensnare the relatively inexperienced Mr Conte, the political reality is that Mr Salvini can pull the plug on the coalition at any time. He will probably wait until after next year’s European elections.

Remember that Italy is the country where the EU’s two crises come together — immigration and eurozone. A majority of Italians still support the EU, but Euroscepticism is rising. The EU will need to deliver solutions to both problems, not just paper over the cracks as it did last week.

The trouble with the EU is that its stability depends on the likes of Mr Salvini and Mr Trump never coming to power. It risks becoming the Weimar Republic of our times — a construction fit only for a temperate political climate.

Leader of far-right League seeks to beat ‘Europe of the elites’ in 2019 elections

Matteo Salvini, Italy’s deputy prime minister and leader of the far-right League, has said next year’s European elections are an opportunity to create an “international alliance of populists” and overcome a “Europe of the elites”.

Mr Salvini, whose party has been soaring in opinion polls this year after it took the reins of government in Rome, is emerging as one of the most disruptive politicians in the EU, challenging Brussels and individual EU capitals on everything from economic policy to immigration and foreign affairs.

At a political rally in Pontida, a small town in Lombardy considered the spiritual home of the League, Mr Salvini told activists, lawmakers and supporters that he was gearing up for the next political battle after taking power following Italy’s general election in March.

“The European elections next year will be a referendum between the Europe of the elites, of banks, of finance, of immigration and precarious work; and the Europe of people and labour,” Mr Salvini said. “Our project consists in creating an international alliance of populists, which for me is a compliment. I believe we will win a majority”. 

Mr Salvini has forged ties with a vast array of European far-right politicians, from Marine Le Pen of France to the Alternative for Germany (AfD). Outside the EU, Mr Salvini has built a close relationship with Vladimir Putin’s United Russia party, as well as Steve Bannon, the former senior political adviser to US president Donald Trump.

Since taking office in the role of interior minister in the new government, Mr Salvini has taken a hardline stance on immigration, blocking vessels rescuing migrants in the Mediterranean Sea from docking in Italian ports.

Although he has toned down his previous calls for an Italian exit from the euro, Mr Salvini has kept taunting and attacking EU leaders for supposedly taking decisions that clash with the interests of the Italian people — a taste of the European election campaign to come. 

Some polls show that the League is emerging as the most popular political party, eclipsing the anti-establishment Five Star Movement, its government coalition partner. And in a sign of Mr Salvini’s growing confidence, he told the crowd in Pontida that the party was set for a long era in power. 

“We will govern Italy for the next 30 years, this Italy does not fear anything,” he said.

While Mr Salvini’s allegiances with the conservative far-right in the the May 2019 European elections are crystallising, it is far from certain whether Five Star, which is allied with the UK Independence party in the European Parliament, will run on its own or with partners across the continent.

The centre-right Forza Italia party, led by former prime minister Silvio Berlusconi, is part of the European People’s party, while the centre-left Democratic party, is part of the European Socialists Group.

Some PD lawmakers close to Matteo Renzi, the former prime minister, have been considering a tie-up with La Republique En Marche, the political party led by French president Emmanuel Macron.

Activist investor and Cevian Capital express concerns over non-cash merger

Elliott Advisors, the US activist investor, has criticised the terms of the merger of the steel operations of ThyssenKrupp and Indian rival Tata, accusing the German industrial conglomerate of giving away assets too cheaply.

The non-cash merger to pool the European steel assets of ThyssenKrupp and Tata into a new company based in the Netherlands struck late on Friday does not need shareholder approval, having been agreed by ThyssenKrupp's supervisory board. Two members of that board voted against the deal, with a third abstaining, according to a person with knowledge of the matter.

ThyssenKrupp declined to comment. 

The deal creates an enlarged group with €17bn in sales, 48,000 employees and 34 sites. The German group will transfer pension obligations worth €4bn into the joint venture, while Tata will put in €2.5bn in debt. Both partners will hold a 50 per cent equity stake, but ThyssenKrupp would get 55 per cent of the proceeds of a future initial public offering.

Calculations by Elliott, which owns a stake below the 3 per cent disclosure threshold, seen by the Financial Times estimate ThyssenKrupp’s fair stake in the new company at about 80 per cent, based on the higher profitability of its European steel operations.

Elliott estimates that ThyssenKrupp's higher share in the proceeds of a future IPO are worth €150 to €200m. The funds declined to comment.

Cevian Capital, the Swedish activist investor which holds an 18 per cent in ThyssenKrupp, also has concerns about the valuation of the deal, according to people with knowledge of the situation.

The fund manager, which did not comment on the valuation, on Sunday welcomed the joint venture as “a step towards reducing the overly complex conglomerate structure”.

But Lars Forberg, founding partner of Cevian Capital, said in a statement that there was “now an urgent need and opportunity to address the significant and persistent underperformance of the industrial businesses” of ThyssenKrupp. He said the group’s conglomerate strategy and matrix organisation “have failed”.

A person close to Elliott pointed out that ThyssenKrupp’s industrial operations were performing worse than peers, as profit margins and growth rates were both subpar.

“The key question is if the people at ThyssenKrupp who are setting the new targets are credible, given that they did not meet a single target over the past seven years,” the person said, adding that “the upside of the company is enormous”.

Heinrich Hiesinger, chief executive of ThyssenKrupp, defended the deal. “There was not any unreasonable compromise,” he told analysts in a call on Saturday, adding that the tie-up created about €5bn in additional value for both partners due to cost synergies.

The criticism will add pressure on ThyssenKrupp ahead of an update this month to investors about future plans. The Essen-based group, whose products range from submarines to chemical plants, car parts and elevators, is reviewing strategy and targets for its remaining industrial operations.

About 4,000 jobs will be axed in the merger, which aims to bring down annual costs by €400m to €500m. The companies plan to cut overhead costs, pool procurement and use different production facilities more efficiently. Over time, lower capital spending and better working capital management are expected to generate additional cost savings.

Looking for a port in a storm?

If you’re feeling a bit battered by trade-war fears or other political issues, consider Norwegian stocks, which have been holding up better than other equities, thanks in part to the country’s low level of political risk.

Worrying headlines are “driving some demand toward countries like Norway,” says James Calhoun, a portfolio manager at Accuvest Global Advisors. His shop is wagering on the stable, oil-rich, and independent-minded Scandinavian nation via the Global X MSCI Norway exchange-traded fund (ticker: NORW). “There is an advantage to being in low-risk countries,” Calhoun tells Barron’s. “Our model is picking up on that—this higher demand for a more protected currency and a lower political-risk environment.” Accuvest places country bets based on a model with four categories: risk, momentum, valuation, and fundamentals.

Global X’s Norway ETF, along with the rival iShares MSCI Norway Capped (ENOR), which tracks the same MSCI index, are among this year’s five top-performing foreign equity ETFs, according to research firm XTF.com’s data on U.S.-listed, country-specific, nonleveraged funds. Each Norwegian fund is up about 8% as 2018’s first half comes to an end, while the Oslo OBX benchmark has gained about 9%.

Norway’s stocks don’t look like a steal, but Calhoun notes that they appear roughly average in terms of price to forward-year estimated earnings. They trade around 13.8 times consensus forecasts, while the mean is 13.6 among the 35 nations that Accuvest ranks each month. And Calhoun points out that the Norwegian krone rates as the second-cheapest currency by Accuvest’s metrics. That basically means a discount for anyone buying with dollars. Norway doesn’t use the euro, and it isn’t part of the European Union, although it is in the European Economic Area—kind of an “EU Light.”

The biggest component for the Global X and iShares funds, which each has 61 holdings, is oil giant Equinor (EQNR.Norway), previously named Statoil, with a 19% weighting. Then come bank DnB (DNB.Norway) at 11%, telecom Telenor (TEL.Norway) at 9%, and seafood outfit Marine Harvest (MHG.Norway) at 5%.

Brent crude, the global benchmark, briefly traded above $80 a barrel in recent weeks, a level last seen in 2014, and it’s up more than 60% over the past 12 months. North Sea oil has been a massive boon to Norway, making the country’s sovereign-wealth fund the world’s biggest with $1 trillion in assets.

Norway’s fundamentals, meaning both economic growth and corporate earnings, have looked a little soft lately by some Accuvest metrics, but Calhoun sees improvement ahead. “Another one quarter or two quarters of high oil prices, and the underlying fundamentals—the earnings growth, the sales-per-share growth, the return on equity for Norway—should start to come up,” he says.

Broadly speaking, Norway’s economic growth looks solid, albeit not stunning like the country’s fiords. Economists surveyed by FocusEconomics see gross domestic product expanding by 2% both this year and next.