From the studio

Video: CIO's Sundeep Gantori on what's next for AI(2:12)
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Thought of the day

Oil prices jumped on Wednesday after CNN reported that new US intelligence suggests that Israel is preparing for a potential strike on Iranian nuclear facilities. Brent crude was trading 1% higher at USD 66 per barrel at the time of writing. Iran is one of the largest producers among OPEC members—it produces over 3.4 million barrels of crude per day and exports over 1.5 million barrels a day—and an attack could disrupt crude flows from the country. Gold was up 0.6% to above USD 3,300/oz.

The news came amid mixed headlines on US-Iran nuclear talks in recent days. Earlier this week, Iran’s Supreme Leader, Ayatollah Ali Khamenei, said negotiations with the US are unlikely to result in a deal after US President Donald Trump suggested an agreement was close. While there were reports saying Tehran is willing to limit uranium enrichment in exchange for sanctions relief, Khamenei called US demands “excessive and outrageous.”

It remains to be seen how the nuclear talks evolve, but the jump in oil prices underscores that investors must still contend with geopolitical risks along with other sources of uncertainty. Israeli military forces this week escalated their airstrikes in Gaza, as indirect ceasefire talks between Israel and Hamas in Qatar appeared to falter again. Trump’s call with Russian President Vladimir Putin on Monday yielded little progress, and the EU and the UK announced new sanctions against Russia.

We recommend investors hold sufficient exposure to gold in a diversified portfolio as a hedge. We also believe quality fixed income and hedge funds can help manage market volatility ahead despite improving headlines on trade.

Gold remains an effective portfolio diversifier. Gold has continued to affirm its value as a portfolio hedge, having rallied some 25% this year. While it has come off from record highs amid optimism that the worst of the trade war is over, we remain constructive on bullion’s long-term value. We think gold prices will be supported by a decline in real interest rates, a weakening US dollar, and a structural shift in institutional buying. For example, China’s gold imports in April surged to an 11-month high after Beijing allocated fresh quotas to commercial banks last month.

Quality bonds have historically offered portfolio stability. US Treasury yields have climbed steadily in recent weeks as the country’s fiscal outlook was back in focus amid budget negotiations in Congress. But while Trump’s “One, Big, Beautiful Bill” is expected to add to the country’s already elevated debt, the Trump administration has demonstrated sensitivity to higher bond yields, and we expect slowing US growth and a weakening labor market would allow the Federal Reserve to resume policy easing later this year. We expect Treasury yields to fall for the remainder of the year, and believe highly-rated government and investment grade bonds offer an opportunity for investors seeking durable portfolio income.

Hedge funds can be nimble in navigating market volatility. We see hedge funds as valuable diversifiers—whether through global-macro trading, market-neutral equity strategies, or agile multi-strategy platforms—as they can help cushion drawdowns when traditional stock and bond investments struggle. Given their broader and more flexible mandate, hedge funds can dynamically adjust positions, deploy leverage, and hedge key risks. We think a modest allocation to select hedge funds can enhance portfolio resilience and smooth overall return outcomes.

Investors should ensure their ability to manage risks inherent to alternatives before they invest in hedge funds, including but not limited to illiquidity and the use of leverage.