The current investment landscape has been shaped by a multitude of new challenges that have occurred in April. These challenges include a significant rise in protectionist policies, the looming threat of new tariffs, ongoing global trade frictions, as well as consistently high interest rates. All of the above are contributing factors to a highly volatile global market.

At the same time, the S&P 500 is facing correction expectations, which in combination with the apparent stagnation of the European economy have investors rethinking their strategies from a long-term perspective.

During unstable times like this, everyone’s first instinct is to protect their established capital. This is not achieved by removing oneself from the market entirely, but through careful recalibration. Companies with a strong cash flow, healthy balance sheets, and consistent dividend policies garner much attention during such periods. This is mostly evident in traditionally stable sectors, which tend to be less affected by instability, such as healthcare, utilities, and consumer staples. This preference is mostly due to their robust financial structure and general resilience — both invaluable qualities in turbulent periods. Furthermore, companies with operations primarily focused on domestic markets may be less exposed to the effects of global tariff disruptions.

While short-sighted solutions dominate the headlines; acute investors will see through them and realise the relevance of structural investment themes, with green energy and sustainability continuing to receive support in major economies across the world. Tense geopolitical situations may provide fertile ground for sectors such as infrastructure and defence to thrive. Additionally, the rampant advancement of artificial intelligence and system automations present opportunities for long-term growth, while it should also be noted that the market’s current volatility may open the path for more attractive valuations.

A potential way to reduce portfolio volatility may be to focus on companies that return capital to shareholders, such as those engaging in stock buybacks supported by strong fundamentals. Such companies usually perform better and avoid instability during turbulent periods, counteracting sentiment-driven price swings.

Another aspect that needs to be taken into account is geographical exposure. While the U.S. currently maintains a stable and robust market in terms of liquidity and regulation, there is a possibility that the high concentration in large-cap tech may increase portfolio sensitivity. Emerging markets, while under pressure, present selective opportunities, particularly in regions less tied to transatlantic trade. Meanwhile, partial currency diversification (gold, Japanese yen, Swiss francs) may serve as a hedge against the current international financial uncertainty.

Long-term investors may identify opportunities to buy high-quality positions at lower valuations, which are a result of the current economic conditions of the global economy. A disciplined approach, such as dollar-cost averaging, may help mitigate short-term risks for some investors, depending on individual circumstances.

Naturally, short-term investors may want to take a step back until they spot clear signs of a significant swing in the market.

We may have painted a clear picture of conditions and situations that may pose a significant threat to investors worldwide, but at the end of the day, the greatest enemy is sentimentality affecting decisions. Reactive, emotional decisions are more often than not unreliable, as they are made through a distorted worldview. With political developments and tensions affecting markets more and more each day, investors need to stay focused on flexibility, risk management, and measured exposure to effectively navigate these trying times.

Stocks (55%)

US Stocks (60% of stocks)

• Healthcare (20% of US stocks): Examples of large-cap names include UnitedHealth Group (UNH), noted for its insurance business, and Eli Lilly (LLY), recognized for its diabetes portfolio—both offering consistent performance and growth.

• Consumer Staples (30% of US stocks): Companies like Procter & Gamble (PG) and Walmart (WMT) are known for stable demand and cash flow across market cycles.

• Dividend Payers (30% of US stocks): Johnson & Johnson (JNJ) and CocaCola (KO) are examples of dividend-paying companies with lower volatility.

• Big Tech: Nvidia (NVDA) and Microsoft (MSFT) are major players in AI and cloud technology, with long-term potential, though they may be more sensitive to market swings and trade dynamics.

European stocks (20% of stock allocation)

• Renewable Energy (33% Europe): Companies like Vestas Wind Systems show potential for long-term growth in the green energy sector.

• Pharmaceuticals (33% Europe): Novo Nordisk (NVO) continues to lead in areas such as diabetes and obesity treatments.

• Defence (33% Europe): Rheinmetall AG (RHM) has gained attention due to increased European defence budgets.

Emerging Markets (20% of stock allocation)

• Selective Growth (100% EM): ETFs like the iShares MSCI India ETF (INDA) offer exposure to India’s domestic economy, which may be less impacted by transatlantic trade frictions.

Fixed Income (22.5%)

• US Treasury Bonds (70% of fixed income): The iShares 3–7 Year Treasury Bond ETF (IEI) may provide a degree of stability amid market volatility.

• Investment-Grade Corporates (30%): Funds such as the Vanguard Intermediate-Term Corporate Bond ETF (VCIT) offer access to high-quality issuers and moderate yield.

Alternatives (12.5%)

• Gold (50%): SPDR Gold Shares (GLD) is a widely-used ETF that can serve as a hedge against inflation and geopolitical risk.

• Commodity ETFs (50%): Invesco DB Commodity Index Tracking Fund (DBC) provides diversified exposure to energy and agriculture.

Cash (10%)

• Held as reserves for potential rebalancing or future opportunities.

Portfolio Summary:

• Stocks: $55,000 (55%)

• Fixed Income: $22,500 (22.5%)

• Alternatives: $12,500 (12.5%)

• Cash: $10,000 (10%)

Objective: To illustrate a potential approach that emphasizes capital preservation (via Treasuries, gold, and staples) alongside selective growth exposure in sectors such as healthcare, renewable energy, and emerging markets—while keeping flexibility through cash reserves.

Maxim Manturov - Head of Investment Research, Freedom24

Disclaimer: Your capital is at risk. Past performance is not indicative of future results and there is no guarantee that any investment strategy will achieve its objectives. It is important to conduct thorough research and consider seeking advice from a qualified financial professional before making any investment decision. Access to a specific financial instrument is subject to a suitability test. The company may participate in trading the financial instruments mentioned in this material, acting as a counterparty or a liquidity provider. However, all the recommendations and information presented in this material are independent in nature and are not associated with the company's trading positions. We take all necessary steps to prevent any conflict of interest and to ensure the objectivity of the information provided.