Video:Strengthen the core: Review your goals
While many corners of global stock markets have rebounded from Iran war lows on renewed AI optimism and strong first-quarter US earnings, bond investors have begun to fret more about the risk of rising inflation forcing central banks to hike rates and tighten policy. Additionally, bigger questions about AI disruption, government debt sustainability, and emergent credit stresses have weighed on investor sentiment at different points through this year. Nervous investors may feel compelled to hold outsized levels of liquidity. But those with excess cash should remind themselves of the big picture.
After a third consecutive year of 20%+ gains in global equities (MSCI All Country World Index) in 2025, investors who held and continue to hold too few equities have paid a price in terms of foregone performance.
Investors who avoided their home stock market may have missed out even more, given how Chinese equities (MSCI China Index), Japanese stocks (MSCI Japan), and European shares (MSCI EMU Index) all outperformed US equities, with gains of around 30%, 25%, and 25%, respectively, last year.
Stocks were not the only strong performers in 2025. Global bonds posted their best results since 2020, while gold climbed 63%, its largest annual gain since 1979.
Looking ahead, we maintain a constructive view on markets, and expect global equities to rise by end-2026 but with periodic bouts of volatility, as investors digest economic, technological, and geopolitical developments.
Nerves need not stop investing, even when some stock markets sit at or near all-time highs. Holding too much cash can erode long-term wealth. There are better options than waiting for a market drop.
First, maintain a balanced portfolio. A solid core is key for long-term success. CIO likes putting 30–70% of assets in stocks, with at least half in US shares and at least 20% in global markets, including Europe and emerging economies. Up to 30% can go to growth themes like AI, Power and Resources, and Longevity. Fixed income—such as government and corporate bonds—can make up 15–50% of assets. Aim for a mix that matches currency needs. Alternatives like hedge funds, private markets, and infrastructure can add more diversification and help manage risk.
Second, rebalance. Big market moves can shift portfolios away from targets. Rebalancing means trimming outperformers and adding to underperformers. This can help lock in gains, control risk, and keep investors on track. Professional managers do this regularly, and individual investors can benefit from the same discipline—especially in volatile times.
Third, look for ways to protect and grow wealth. Managing risk is as important as choosing the right assets. The cautious can reduce some stock exposure and add capital preservation strategies or gold, which has historically been a good long-term hedge. The more adventurous can consider tactical equity ideas or structured products that limit losses or boost yield.
The farsighted can also look at alternative investments like hedge funds, private equity, private credit, and infrastructure for new sources of return. We like hedge funds (including regional opportunities focused on Asian markets), private infrastructure, and private market vehicles that generate income from royalties. CIO suggests that investors with an “endowment” style may benefit from allocating up to 20-40% to alternatives, with careful manager selection and effective diversification across strategies. This approach can improve portfolio resilience and adaptability to changing market conditions.
However, investors must be able and willing to bear the unique risks of investing in alternative assets, including but not limited to illiquidity.
