A funds management house has suggested individuals must not automatically follow traditional investment approaches in the face of current events shaping the global geopolitical environment.
Specifically, Schroders head of multi-asset and fixed income Sebastian Mullins noted equity market volatility cannot be controlled simply by including allocations to government bonds or gold in an investment portfolio.
“For decades, investors could rely on a relatively stable relationship between growth assets and traditional defensive assets,” Mullins said.
“That world has changed. Persistent inflation, geopolitical conflict and supply-side shocks have created a market where the assets that protected portfolios in one crisis may fail in the next.”
He pointed out recent years have demonstrated how different events result in varied market outcomes.
“During the market uncertainty of 2025, gold and international assets performed well as investors moved away from the US,” he acknowledged.
“Yet when conflict escalated in the Middle East this year, the market response was almost the opposite. The US dollar strengthened, capital flowed back into US assets and gold failed to provide the protection many investors expected.
“The lesson isn’t that gold no longer has a role. It’s that investors need to understand what is driving each market event rather than assuming the same assets will always behave the same way.”
He indicated the same principle applies to the fixed-income asset class.
“There is still an important role for government bonds, but investors can no longer assume they’ll always offset equity market weakness,” he said.
According to Mullins, investors must adopt new approaches to achieve effective portfolio diversification.
“Modern portfolio construction isn’t about finding one perfect hedge. It’s about building a range of exposures that respond differently depending on what’s driving markets,” he said.
“That may include commodities during supply shocks, currencies during geopolitical events or alternative assets that have genuinely different return drivers.”
He predicted the defining features of the market will likely continue to be inflation cycles, geopolitical fragmentation and supply disruptions.
“The investors who navigate this environment most successfully won’t necessarily be those who pick the best-performing asset class. They’ll be those prepared to continually reassess how they protect their portfolios,” he noted.