The stock market has been on edge, with rising volatility, growing concerns about a potential 20% correction or more, and increasing fear among investors. From Federal Reserve policy shifts to geopolitical tensions, uncertainty is the dominant theme in 2025.
But uncertainty doesn’t mean you have to sit on the sidelines. The key to surviving — and thriving — in this environment is building a crisis-proof portfolio that can weather market storms while still offering growth opportunities. Here’s how to do it.
1. Diversify Across Asset Classes
Relying solely on stocks is a recipe for disaster in a volatile market. A truly crisis-proof portfolio spreads risk across multiple asset classes:
- Stocks: While equities remain a core component, focus on defensive sectors like Health Care (XLV), Consumer Staples (XLP) and Utilities (XLU).
- Bonds: Long-term Treasuries (TLT) can act as a hedge if stocks fall further. Short-term Treasury ETFs like SGOV or BIL offer a safe place to park cash while earning a yield.
- Precious Metals: Gold (GLD) and silver (SLV) are classic hedges against inflation and market turmoil, especially as central banks around the world continue to adjust monetary policy.
- Commodities & Energy: Oil and natural gas exposure can help hedge against inflationary pressures and supply shocks.
2. Increase Exposure to Cash & Short-Term Treasuries
In uncertain times, liquidity is king. Having a portion of your portfolio in cash or short-term Treasuries allows you to:
- Take advantage of buying opportunities when stocks correct.
- Reduce volatility and preserve capital.
- Earn a yield through money market funds or Treasury bills (currently yielding over 4%).
Rather than letting cash sit idle, investors can use short-term Treasury ETFs like SGOV, BIL or ICSH to earn returns while keeping funds accessible.
3. Hedge with Options and Defensive Trades
For active traders, options can serve as an essential tool for protecting a portfolio:
- Put Spreads on Index ETFs: Buying put spreads on the S&P 500 (SPY) or the Nasdaq 100 (QQQ) allows traders to profit from a market downturn while limiting downside risk.
- Covered Calls on Individual Stocks: Selling covered calls on core holdings generates income while reducing portfolio volatility.
- Long Volatility Positions: Instruments like the VIX or volatility ETFs such as VXX or UVXY can serve as a hedge if market panic spikes.
4. Pay Attention to the Bond Market and Interest Rates
The bond market is flashing warning signs, with the 10-year Treasury yield declining amid economic slowdown concerns. A falling 10-year yield typically signals market uncertainty, and if it drops further, it could indicate a recession ahead.
Investors should monitor interest rates closely, as the Federal Reserve is expected to cut rates in mid-to-late 2025. Lower rates could drive stock prices higher, but they may also reflect economic weakness, requiring adjustments to portfolio positioning.
5. Stick to a Risk-Managed Approach
In times of uncertainty, the most dangerous move is chasing momentum without a plan. Investors should:
- Set clear stop-loss levels to manage risk.
- Use trailing stops to lock in gains.
- Keep position sizes small to prevent overexposure to any single trade.
A well-structured crisis-proof portfolio doesn’t just survive market downturns—it positions investors to take advantage of opportunities when fear is at its highest.
While no portfolio is completely immune to market downturns, a diversified, well-hedged approach can protect against downside risk while still allowing for upside potential. The key is preparation—because when the next wave of volatility hits, the investors who planned ahead will be the ones in control.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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