Mitigating Market Swings Due to Recent Tariff News
With equity markets continuing to experience volatility in today’s climate, we’re taking a closer look at two key defensive positions we hold across all our model portfolios. These long-term hedges are designed to help manage portfolio risk and have historically performed well when stocks perform poorly.
This is just one of several strategies we’ve implemented to reduce risks for clients. In our last video, we covered the hedge note we recently added to portfolios and we’ve also discussed our sector overweight strategy.
To help manage volatility, we maintain two key defensive positions across all our model portfolios:
Gold ETFs (GLD, IAU, GLDM)
These funds are backed by physical gold bullion and track the spot price of gold.
Gold has long served as an alternative to fiat (paper) currency and therefore remains widely held by sovereign wealth funds, endowments, institutions, and individual investors.
It has acted as a store of value during periods of currency weakness and global market stress.
Long-Term Treasury ETFs (VGLT, TLT)
These funds invest in U.S. Treasury bonds with maturities of at least 20 years.
Longer-maturity bonds are sensitive to interest rate changes, and rates tend to fall during market volatility or economic uncertainty – boosting the value of these securities.
Backed by the full faith and credit of the U.S. government, Treasuries are considered a safe-haven investment, offering stability relative to other bond categories.
As shown in the chart below, gold and long-dated Treasuries have performed as expected – delivering positive returns since the stock market’s decline that began in February.
In Summary
These long-term defensive positions often go unnoticed in strong equity markets but prove their value when volatility rises. True to form, they have helped strengthen risk management across client portfolios in recent months.
For clients with larger equity allocations, these holdings are especially important, providing greater stability as we navigate ongoing market uncertainty.
If you have any questions about your portfolio or these positions, please don’t hesitate to reach out – we are happy to discuss this in more detail!
Have questions or want to speak with our team directly? Contact us.
Robert Amato, CFP®, CIMA®
Principal
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Compass Wealth Management is a Registered Investment Advisor. Advisory services are only offered to clients or prospective clients where Compass Wealth Management and its representatives are properly licensed or exempt from licensure. This article is solely for informational purposes and is not intended to be relied on as a forecast, research, or investment advice, and is not a recommendation, offer, or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Compass Wealth Management to be reliable, are not necessarily all-inclusive, and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investments involve risks.