Investor Takeaways for Managing Volatility

This year’s uncertainty is producing a somewhat surprising group of winning and losing asset classes. And there are still two months to go in 2025. Many investors are rerouting their investments into different asset classes because of geopolitical risks like the US trade war, elevated inflation, and high interest rates. A more recent development is the budget battle in Washington, D.C. While the macro environment is pressure-testing portfolios, it’s also serving as a reminder about the benefits of diversification. So, which asset classes are leading and lagging as 2025 prepares to wrap up? And how’s the classic 60/40 portfolio holding up? Morningstar portfolio strategist Amy Arnott has examined the data.

The hunt for cockroaches may produce opportunities for patient investors. JPMorgan Chase CEO Jamie Dimon reacted to First Brands’ and Tricolor’s bankruptcies saying, “When you see one cockroach there are probably more.” Dan Kemp, chief investment research officer at Morningstar Investment Management Europe, says people are looking for more cockroaches to emerge due to weak lending standards via private credit. Despite the bankruptcies primarily involving the US markets, European banks took the hit. Kemp says there are bargains and more could surface if there are additional bankruptcies.

Can the Gold Rush Continue? Warning Signs for Investors

On this episode:

Market volatility has recently increased. Can you talk about what’s fueling it? 

We’re going to talk about asset classes that are winning and losing so far this year. Let’s start with the leaders. Gold hit record highs this year, but a sharp selloff this week has stopped the rally. Who’s been buying gold?

Cryptocurrencies have been on a tear despite a recent big selloff due to the US trade war. The volatile sector has rebounded. What’s driving its performance?

We’ve talked on the podcast in the spring about the outperformance of international stocks. Is the streak still going, and do overseas opportunities still exist? 

We’re now focusing on the three losing asset classes. The real estate sector is having a tough year. Can you give us the details? 

Why are US small-cap stocks and some bond segments lagging? 

How is the government shutdown affecting the demand for US Treasuries? Could this affect their safe-haven status?

The US dollar isn’t having a great year either. Could the world’s reserve currency weaken even more? 

How has the popular 60/40 portfolio—made up of 60% stocks and 40% bonds—performed? 

What about other popular portfolios, such as the three-fund portfolio or the more diversified portfolio your team looked at in the Diversification Landscape? 

What’s the takeaway for investors as they brace for more market volatility?

The stock market tumbled earlier this month, and cryptocurrencies like bitcoin and Ethereum fell with it. There’s the argument that crypto can serve as an effective diversifier for stocks. What’s your take, and what has filled the safe haven role this year?

In this week’s Markets Brief, you wrote about weaknesses in the financial services sector and a so-called cockroach hunt. Can you explain what’s going on, and how patient investors can find opportunities?

What do you plan to highlight in next week’s Markets Brief?

What to watch from Morningstar. 
The Stock Market Is Ultra-Concentrated. Here’s How to Manage the Risks.

New Crypto ETFs Are Coming. Here's How Investors Can Prepare

How Inflation, AI, and Budget Battles Will Shape the Stock Market in Q4

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