Resilient portfolios for a volatile 2026

December 2025 by Mario Pires

For decades, investors have balanced the growth potential of stocks with the stability of bonds in their portfolios. The 60/40 allocation (60% in stocks, 40% in bonds) was a classic strategy during that era of rewarding returns and low (or negative) correlation between these two asset classes.

However, since 2022, the combination of persistent inflation, higher interest rates, rising commodity prices, and geopolitical tensions has led to a significant increase in the volatility of bonds, which have become highly correlated with equities and are no longer the traditional "safe haven."

The old assumptions no longer work. The era we live in is no longer the same, and the structural factors that led to this change will remain in 2026 and for years to come. These include, for example: 

• Record public debt - High levels of public debt, particularly in developed economies, are increasing uncertainty in bond markets;
• Population aging - More worrying in developed economies, it extends to some emerging ones, with a reduction in the working-age population and increased pressure on public spending;
• Persistently high interest rates – Labor shortages and low unemployment, trade tariffs, ongoing supply chain constraints, deglobalization, and the costs of the energy transition tend to keep inflation above the historical average, preventing a return to zero interest rates.

Three fundamental principles for investing in 2026. In this new era marked by slow growth and persistent inflation, creating diversified and resilient portfolios requires a new approach, based on three fundamental principles:

1. The new role of bonds:performance

Bonds still have a place in investment portfolios, but they no longer serve as protection against falls in the stock markets. They should be viewed primarily as a source of income and require careful selection and management. Although some may have high rates of return compared to previous periods, they may not compensate in terms of volatility.

Investors need to identify opportunities across the entire debt spectrum, both public and private – from corporate bonds to mortgage-backed securities – to find more stable and less correlated return alternatives to traditional markets.

2. The critical role of active management

During periods of greater volatility, stock performance is less dependent on macroeconomic factors and more indexed to micro-factors related to the specific fundamentals of each company. 

Understanding the reality of companies – the sustainability of their profits, the investment discipline of their management team, the competitive advantages that differentiate them – becomes a central factor, and the ability to make selective allocations will depend on it. This ability to analyze, select, and actively manage offers advantages over passive allocation in identifying companies best positioned to deliver value.

3. Greater breadth of diversification in alternative and private sectors.

Incorporating different classes of alternative and private assets into portfolios provides investors with varying degrees of diversification and decorrelation, which are not possible with traditional asset classes. 

Raw materials, hedge funds, private equity, and private debt are examples of asset classes with very different return factors and risk profiles compared to each other and to traditional assets. Gold, renewable infrastructure assets, or insurance-indexed securities – such as cat bonds or catastrophe bonds – are examples of this universe of differentiation. 

Many of these assets tend to perform well during periods of turbulence in the stock markets, several have mechanisms to protect against inflation, and some can even generate returns when markets are down.

Current conditions suggest that the high dispersion of returns within different asset classes is likely to persist, favoring a proactive and selective approach where continuous analysis and careful identification of companies, securities, sectors, and regions are crucial. Flexibility, intelligent diversification, and analytical competence will therefore be key attributes for achieving more resilient portfolios, better prepared to navigate the volatility that awaits us in 2026.