A First-half Whiplash Rewards All Weather Portfolios on Wall Street

Despite the turmoil caused by tariffs, inflation jitters, fiscal showdowns, and global conflicts, the first half of 2025 may be remembered not for its volatility, but for delivering one of the most robust periods of synchronized asset class gains in recent memory.

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Rather than causing disaster for bullish investors, the chaotic market conditions have actually benefited those who stayed balanced and diversified. Investors who resisted the urge to over-concentrate in trendy sectors like Big Tech and instead spread their exposure across multiple asset classes have seen some of the strongest relative performance in years.

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One notable example is a multi-asset strategy tracked by Societe Generale, which includes equities, government and corporate bonds, commodities, and cash. This diversified portfolio is on track for its best first-half performance since at least 2008.

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Even the traditional 60/40 portfolio — once considered outdated in the wake of pandemic-related inflation and interest rate disruptions — has demonstrated surprising strength. A commonly used risk-parity strategy, which balances risk across various assets, has also gained around 6%, according to certain estimates.

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This week, shortened by the Juneteenth holiday, offered more evidence that a cautious, diversified approach remains a smart one. Federal Reserve Chair Jerome Powell emphasized ongoing “elevated uncertainty” surrounding economic conditions, warning that recently imposed tariffs could reignite supply-driven inflation.

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Meanwhile, disappointing economic data and continued military conflict between Israel and Iran underscored the need for investors to stay alert to both economic cycles and geopolitical risks.

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With the market sending mixed signals, many professionals are choosing not to take strong directional stances. Instead, they’re focusing on maintaining portfolios that can endure a range of outcomes — a so-called “all-weather” approach.

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“For every economic indicator suggesting strength, there’s another signaling a slowdown,” said John Davi, CEO of Astoria Portfolio Advisors. “The level of uncertainty right now is very high.”

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Investors willing to look beyond the traditional U.S. stock market have been rewarded. In fact, international stocks, gold, and even Bitcoin have all outperformed the S&P 500 so far this year. Davi’s own firm manages a multi-asset ETF where gold is the largest holding. The fund is up more than 10% this year, which Davi attributes to building a portfolio “designed to withstand uncertainty rather than predict it.”

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Market behavior this week mirrored this broader trend. While the S&P 500 closed slightly lower and remains only about 1.5% higher year-to-date, gains in alternative assets have carried diversified portfolios. Ten-year Treasury yields held steady, and a major index tracking government bonds is up about 3% in 2025.

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Instead of relying on familiar winners like U.S. mega-cap tech stocks, successful portfolios this year have been lifted by assets that had fallen out of favor. For instance, developed-market equities outside the U.S. and Canada have jumped 14% so far. The Bloomberg Commodity Index has surged 8%, and gold has risen nearly 30%.

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“U.S. investors are often reluctant to invest internationally,” noted Manish Kabra of Societe Generale. “But true diversification means holding assets you may not feel comfortable owning.”

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There are signs that American investors are slowly expanding their horizons. Data from Bloomberg shows that over the past month, the top 12 exchange-traded funds (ETFs) attracting investor capital span a wide variety of asset types — including gold, Bitcoin, international equities, and short-term Treasury bills — along with traditional U.S. stocks and bonds.

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Todd Sohn of Strategas said ETFs have become a natural tool for investors seeking broader exposure, particularly in low-duration fixed income strategies. “Ultra-short duration funds have seen the second-highest inflows of any ETF category we track,” he said, noting their appeal in today’s uncertain interest rate environment.

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Nevertheless, equities remain the most popular destination for investor capital. Equity ETFs alone have brought in about $56 billion in June, already topping the totals from both April and May. Overall, cross-asset ETF flows for the year have reached $523 billion, putting 2025 on pace to exceed $1 trillion in ETF inflows for the second consecutive year — a record first achieved in 2024.

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Whether these bets will pay off amid evolving economic conditions remains to be seen. A recent run of disappointing data has pushed Citigroup’s U.S. Economic Surprise Index to its lowest point since last September. The Fed, for its part, revised its 2025 economic forecast this week, lowering growth expectations and raising projections for unemployment and inflation.

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“The macro backdrop has changed rapidly in 2025,” said Ayako Yoshioka, senior portfolio manager at Wealth Enhancement Group, which manages $100 billion in assets. “Concentration works well in bull markets. But when the environment changes this often, diversification helps protect what you’ve earned.”

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In a year shaped by uncertainty, strategic balance — not bold bets — appears to be winning the day.

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