Finding Portfolio Resilience in Uncertain Times

Raise your hand if you’ve encountered this headline recently: “Market Drops Sharply on Fears of Wider Mideast War”. What about this one: “Stocks Fall as Oil Prices Hit New Highs”? Or this: “Wall Street Sees Volatile Session Amid Uncertainty”? Odds are good that your hand went up (or at least it would have if you were playing along). Of course, we’ve all been exposed to the concerning headlines lately, felt uncertain, and maybe even had a knee jerk reaction to sell assets and hoard cash. But what if we told you those headlines are over 35 years old? Yup, those are New York Times banners from August 1990. They were written after the Iraqi invasion of Kuwait, when equity volatility spiked, oil prices went parabolic, and doomsday was supposedly imminent. Sounds familiar, right?

As we navigate the headlines surrounding the conflict in Iran, it’s important to remember that markets have faced geopolitical shocks many times before — and each time, volatility has ultimately given way to stability as conditions clarify and the situation is resolved. Yes, time can be an investor’s best friend. We’ll come out of this crisis, just as we always have in the past. In the meantime, as a prudent investor, you can also play an active role in your portfolio construction. With that in mind, we’ll highlight some key themes we believe can help you navigate market turbulence that we at LPL Research are currently employing in our strategically aligned model portfolios.

Alternative Investments

We like diversifying liquid alternatives and uncorrelated return streams. Global macro funds use macroeconomic signals (consider geopolitical developments such as kinetic conflicts as part of this), to invest across a broad range of asset classes, including but not limited to equities, fixed income, currencies, and commodities. These funds take a broad top-down approach and can be managed either on a discretionary basis, meaning they have more flexibility in positioning, or systematically, meaning they follow rules-based trading and position sizing techniques. Managed futures strategies, aka trend followers, can invest both long and short (i.e., they can take positions that can benefit from gains or declines) across a wide range of asset classes and work well in environments where price trends are more persistent, thus allowing managers to better capitalize on themes and sentiment. Multi-strategy, as the name implies, can combine multiple hedge funds or alternative investment styles into a single vehicle with the goal of enhancing risk-adjusted returns through diversification. We believe a thoughtful mix of these strategies can be impactful in limiting long-term capital deterioration, particularly amid periods of market uncertainty.

Treasury Inflation-Protected Securities (TIPS)

If you hold the view that the market is underpricing inflation risks, which we do on a long-term basis, then TIPS can help hedge that risk. We prefer TIPS with shorter duration (less interest rate sensitivity) to manage rate exposure. It’s important to note that TIPS really provide value when there are inflation surprises to the upside. Standard Treasury (nominal) yields already have an expected inflation component baked in as investors demand some sort of maintenance of purchasing power. TIPS, however, can capture what the market hasn’t priced in by adjusting the principal, and thus coupon payments, upwards when inflation exceeds what’s already expected. The longevity of the current conflict in Iran will go a long way in determining how meaningful the impact on inflation will be. Also, as we’ve seen recently, certain pockets of the global market experience varying degrees of sensitivity to input costs and thus inflation expectations (e.g., Japanese equities have traded meaningfully lower than U.S. tech since the start of the conflict). Nonetheless, the potential for inflationary shocks is omnipresent, and allocations to TIPS serve well to quell such shocks.

Real Assets

In a similar vein as alternatives and TIPS, we believe commodities and global listed infrastructure assets can help provide diversifying properties and inflation absorption to portfolios. However, they offer more nuanced exposure to real assets, often physical in nature, that hold intrinsic worth. These assets, as scarce storers of value in many cases, can play a particularly important role as both return enhancers and diversifiers. In the case of commodities, think of the energy and agriculture complexes, each trading meaningfully higher as supply fears and international trade disruptions have taken hold this month. In infrastructure, consider contractual lease agreements, and regulated pricing of real estate and utilities businesses. Combined, these asset classes can coalesce as a formidable portfolio ballast, staving off inflation, providing current income and return differentiation.

Conclusion

When enduring uncertain moments like these, it’s important to stay anchored in long-term fundamentals, disciplined asset allocation, and evidence-based decision-making. While the situation is evolving, the underlying drivers of portfolio resilience remain unchanged, and history reminds us that well-constructed investment strategies are built to withstand periods of geopolitical stress.

As always, LPL Research is ready and available to help guide you through asset allocation, portfolio construction, and investment vehicle implementation decisions. For additional information on our long-term, strategic asset allocation, please visit our recently updated 2026 Strategic Asset Allocation.