As outside forces created step-changes in fundamentals that yanked markets in every direction, 2025 served as a good reminder that shielding portfolios from only the truly harmful equity drawdowns delivers a much better cost–benefit tradeoff than hedging every dip. With an evolving set of factors that may combine in positive or negative ways, investment flexibility remains key for 2026.

Shaking off a mid-month wobble, stock markets worldwide staged another broad rally in October as tentative peace in the Middle East, a rumored China trade deal and the second rate cut of 2025 lifted spirits.

Between decent growth, tame inflation and increasing liquidity, stocks have suddenly found themselves in a sweet spot that few had predicted just a few months ago.

While the rally since 2022 has been supported by rising earnings, equities have now become reliant on the prospects of a single technology to a degree rivaling the “dot com” era. With concentration and valuation at record levels, the stage is being set for future volatility.    

With the broader macro environment little changed, TCM strategies saw smooth sailing in July as stocks reached fresh all time highs and the VIX remained subdued. But with the seasonally more volatile fall months just ahead and risks on the horizon, the wind may be about to change.