Staying the course: How to build portfolios that withstand volatility

We are living in a period defined not by panic, but by quiet unease. From boardrooms in Mumbai to trading desks in New York, the mood is cautious, calculated, and at times, unnerving. Unlike past crises of 2008’s systemic collapse or 2020’s pandemic panic. This time, there’s no single trigger. Instead, what we are witnessing is a slow, structural recalibration of global markets and capital flows.

Let’s take stock.

The warning signs aren’t subtle anymore. The US Treasury yield curve remains inverted, a classic signal that markets are expecting a slowdown. As of this writing, the 2-year yield sits near 3.76%, while the 10-year is at 4.26%. That inversion implies more than just technical dislocation; it reflects a market anticipating rate cuts, waning demand, and tightening credit. In India, while the yield curve hasn’t flipped, benchmark rates are inching higher, credit costs are sticky, and the Reserve Bank is delicately balancing fiscal pressures with food inflation volatility.

All this is happening against a noisy global backdrop. The world continues to wrestle with the aftershocks of excessive stimulus. During the COVID-19 pandemic, the US Federal Reserve injected nearly four trillion dollars into the system in just six months. That’s more than India’s entire GDP at the time. The consequences were predictable: bubbles inflated, valuations decoupled from earnings, and risk was mispriced at scale. Today, we’re paying the price.

Add to that the reemergence of protectionist trade rhetoric from U.S. political figures, with tariff threats and supply chain fragmentation threatening to reverse decades of global economic integration. Meanwhile, geopolitical fault lines from Eastern Europe to the Middle East and South China Sea are complicating investor confidence.

So, what should a rational investor do?

This is not the moment to run for cover. Nor is it the time to chase yesterday’s momentum. Instead, the smartest portfolios are quietly repositioning. Across both U.S. and Indian markets, a few clear shifts are underway.

First, there is a growing appetite for high-quality duration. With a rate-cutting cycle expected to begin in the U.S. by the third quarter, investors are moving into longer-dated Treasuries and top-rated sovereign bonds. In India, family offices are rotating into RBI Floating Rate Bonds and State Development Loans, while global allocators are building positions in U.S. 10- and 20-year paper through ETFs. The logic is simple: lock in yield now, and ride the price appreciation when rates fall.

Liquidity is also being treated differently. Strategic cash management is back in focus. Indian investors are deploying funds into liquid-plus and ultra-short duration debt schemes with strong credit profiles. In the U.S., short-duration T-bills yielding above 4.9% offer a rare opportunity: yield without long-term commitment. This isn’t idle cash. It’s patient capital.

Equity allocation has grown more selective. In the U.S., there’s a visible shift from speculative tech names to dividend-yielding, cash-rich firms, especially in defense and infrastructure. In India, attention is turning to PSU banks, clean-balance-sheet NBFCs, infrastructure and industrials riding the domestic capex wave, and consumer staples with pricing power and rural distribution strength. The froth in small caps is quietly deflating, particularly in companies where earnings never justified the valuation.

Global diversification is no longer optional. With exposure to China being actively rebalanced, U.S. investors are allocating to India and Vietnam. Indian high-net-worth individuals, in turn, are using the Liberalized Remittance Scheme to access global dividend ETFs and fixed-income products, often hedging against rupee depreciation while preserving capital efficiency.

Real assets are also gaining renewed focus but selectively. Gold is back in institutional portfolios not just as an inflation hedge but as a geopolitical shock absorber. Allocations to sovereign gold bonds and gold ETFs are rising, especially after tensions in the Red Sea reminded markets of how fragile global supply chains remain. Certain real estate investment trusts particularly those in logistics and warehousing are also seeing interest. But commercial REITs, especially those exposed to retail, remain under a cloud.

The one trap investors are actively avoiding? Stretching for yield. There’s growing discipline around avoiding BB-plus paper, structured notes, and opaque NBFC exposure just to squeeze out another 100 basis points. Preservation is the current mandate. Return-seeking will come later when clarity returns.

This active, data-driven rebalancing is not reactionary. It’s pragmatic. Many investors are now building hedge overlays into their strategies. S&P 500 puts, currency overlays on INR/USD exposure, and real-time rebalancing tools are becoming part of the norm, particularly among professional managers. Where portfolios were reviewed quarterly, they are now reviewed monthly.

The bigger picture is this: we are not in a crisis, but we are in a transition. Capital is being repriced. Risk premiums are being reassessed. Monetary policy is diverging, and global liquidity is no longer on autopilot.

This shift won’t announce itself with a crash. It’s happening in plain sight. Slowly, steadily, and sometimes, silently. For the inattentive, it may feel like nothing is wrong. For the prepared, it’s already an opportunity.

There is no need to fear volatility. But you do need to respect it. The investors who stay agile, grounded in fundamentals, and honest about risk will emerge stronger not just intact.

In this cycle, conviction alone isn’t enough. Discipline will define who comes out ahead.

By Amit Jain, Co-founder, Ashika Global Family Office Services