Investors reveal biggest market risks — and the one strategy they all agree on
Experts' advice for navigating volatile markets: Diversification is key
1Volatile markets and concentration risk
2024 has been a year of significant volatility in global markets. Chris Rush, investment manager at IBOSS, stated that investors' biggest risk is overconcentration in past winners while missing other opportunities. U.S. equities' large share in global portfolios increases concentration risk. Rush noted that U.S. economic exceptionalism has declined from pre-2025 levels, and rising debt among the 'Magnificent Seven' adds risk. Diversification across regions and asset classes is becoming increasingly crucial in this environment.
2Real estate investment trusts gaining attention
Rush highlighted that real estate investment trusts (REITs), out of favor for years but now increasingly attractive from a valuation perspective, can help diversify portfolios. His team is expanding exposure to UK equities alongside stocks listed in Asia and emerging markets. He pointed out China's particularly strong performance during recent market pullbacks, suggesting it remains well-positioned. This shift reflects a broader strategy to reduce overreliance on traditional market leaders and explore undervalued opportunities.
3Sectoral and regional diversification
Ben Kumar, head of strategy at 7IM, emphasized that this year's challenge hasn't been overall volatility but specific volatility. Kumar explained how winners and losers keep rotating, making overexposure to any single theme risky. Energy and tech stocks have twice been both the best and worst performers this year. His solution: diversification across sectors and regions has provided significant benefits, allowing investors to navigate choppy markets without betting everything on temporary winners.
4Middle East tensions vs US earnings
Ben Seager-Scott, CIO at Forvis Mazars, described how two powerful forces—Middle East tensions and strong US corporate earnings—are pulling markets in opposite directions. He warned against market complacency regarding geopolitical risks, inflationary pressures, and shifts in AI trade. His team has rebalanced portfolios by rotating from mega-cap tech to ordinary US stocks and shifting from market-cap-weighted to equal-weighted exposures, demonstrating a nuanced approach to risk management in uncertain times.
5Interest rate policy dilemma
Charlie Ambler, co-CIO at Saltus, identified the policy bind around interest rates as the biggest portfolio risk. Central banks struggle to control long-term rates while the economy absorbs massive AI infrastructure investments. Raising short-term rates has become increasingly difficult, forcing policymakers to choose between inflation control and financial stability. Ambler's team responded by broadening exposures across equities, fixed income, and alternatives—particularly assets not correlated with traditional markets.
6AI boom and inflation risks
Steve Brice, Global CIO at Standard Chartered, highlighted two major risks: something disrupting the global AI boom (cyclical risk) and fiscal policy/inflation outlook (structural risk). He cautioned against the 'barbell approach' of heavy growth investments paired with excessive cash holdings. Instead, he advocated increasing allocations to developed market financials and Eurozone industrials while buffering portfolios with bonds, gold, and alternative assets—a more balanced strategy for uncertain markets.
7Hormuz Strait and AI investments
Billy Leung, investment strategist at Global X ETFs, noted markets are weighing two parallel risks: the unresolved Hormuz Strait situation maintaining an oil price geopolitical premium, and more durable concerns about AI capex. The hundreds of billions committed to AI infrastructure have revived debates about circular financing and weak free cash flow conversion in parts of the AI ecosystem. Unlike geopolitical shocks, Leung noted, this risk won't resolve with a single headline, requiring long-term portfolio positioning adjustments.
8The unanimous expert advice: Diversify
All experts agree diversification is crucial amid market uncertainties. Rather than chasing past winners, spreading across asset classes, sectors, and regions reduces risk. Balancing equities with bonds, alternatives, and undervalued assets provides protection in volatile markets. As we move through 2024's second half, investors are expected to adopt this strategy more widely, recognizing that in unpredictable times, not putting all eggs in one basket may be the wisest approach of all.