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Gold has been the standout performer of 2025 so far. Purchases of exchange-traded funds (ETFs) have increased recently alongside ongoing central bank demand, supporting the precious metal.  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.

Hedge funds can be valuable diversifiers—whether through global-macro trading, market-neutral equity strategies, or agile multi-strategy platforms—as they can help cushion drawdowns when traditional exposures misalign. 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.

In equities, investors can consider capital preservation strategies, combining a zero-coupon bond with a call option to limit losses while maintaining exposure to potential gains. Still-high interest rates make the bond component cheaper, but higher volatility may increase call option costs. As volatility could rise further amid trade uncertainty, budget negotiations, and growth concerns, investors should be aware of these higher costs. To mitigate them, investors might opt for longer-duration options or enter positions during lower volatility periods to secure lower costs.