Volatility from geopolitical shocks, inflation swings and sharp market reversals was common in 2025 but have arguably ramped up even further to start 2026.
Such an environment typically sends investors towards long-established shelters, such as gold, government bonds and risk-off currencies – yet many of these stalwarts have struggled to behave as expected.
Below, managers set out how they currently view the traditional pillars of safety – from gold and bonds to commodities and cash – and why many believe portfolios need a wide range of defensive tools.
Gold and other commodities
Michael Walsh, solutions strategist and portfolio manager at T. Rowe Price, said gold continues to feature as a strategic diversifier in investor portfolios but “perceptions have matured”.
“Gold’s move through previous record highs can be seen as confirmation that the macro conditions under which gold has historically added value – policy uncertainty, institutional strain and geopolitical risk – are very much in place,” he said.
“Importantly, gold has demonstrated greater resilience than government bonds when real yields rise, reflecting sustained, largely price‑insensitive demand from central banks seeking to diversify reserves.”
For investors concerned about the credibility of fiat currencies and policy uncertainty, this structural support reinforces gold’s role as a hedge against systemic risk rather than a simple cyclical trade, Walsh said.
Paul O’Neill, chief investment officer at Bentley Reid, also said gold is the “truest” safe-haven asset. However, he has elected to trim back to target weight as the price has continued to rise.
Daniel Lockyer, senior fund manager at Hawksmoor Fund Managers, pointed out that gold is the only asset that stands out as preserving spending power over centuries.
He nonetheless acknowledged it has become a very popular trade in recent months. “Gold’s volatility has increased lately, which does worry us a bit.”
In recent weeks, the price of gold has dropped again as the Middle East conflict continues, shedding 11% to close at shy of $4,500 an ounce on 20 March 2026.
Meanwhile, George Cotton, manager of JSS Commodity Transition Enhanced, argued there is safety to be found in other commodities, which contribute to the 10% of his portfolio allocated to safe-haven assets, alongside gold and bonds.
Bonds
When considering fixed income, Will McIntosh-Whyte, co-manager of the Rathbone multi-asset portfolio funds, said government bonds have shown they can still perform their role in broad risk-off markets.
“There is no doubt there are some concerns over government bonds from countries with significant debt burdens and high budget deficits – however, this is reflected in higher yields,” he said.
“It is important to have diversification so a basket of bonds can provide the risk-off role of a portfolio, while reducing the risk one of those countries makes a fiscal misstep.”
McIntosh-Whyte said he reduced his funds’ 10-year gilts position in late February, “having sold all our 30-years the week before due to our concerns over potential volatility in gilts over the next few months”.
Meanwhile, Rebekah McMillan, associate portfolio manager at Neuberger Berman, said US treasuries can still help hedge growth shocks but noted the firm is ultimately neutral on US government bonds.
She noted they have proved to be less dependable versus inflation or political tail risks and have at times offered deteriorating returns during risk-off scenarios due to deficit, debt-issuance and term-premium pressures.
Tony Gibb, head of investments at Artemis, added: “The fiscal trajectory in the US is difficult to ignore, with deficits running at levels more typically associated with recession or wartime, the supply of government bonds is structurally elevated.
“While treasuries will likely still rally in a growth shock, the magnitude of that rally and the reliability of the hedge is more uncertain than it once was. Investors are being asked to take on meaningful duration risk for a return that may not keep pace with inflation.”
In contrast, short-dated corporate bonds are a “genuinely attractive defensive option”, according to Gibb, “with investors being paid meaningfully to wait, with limited duration risk – the asymmetry is compelling as you clip a reasonable coupon with limited sensitivity to rate moves”.
Meanwhile, Cotton said catastrophe bonds may also offer a compelling alternative for investors seeking safety, providing returns that are largely uncorrelated with traditional financial markets as they depend primarily on natural disaster triggers rather than economic cycles.
Currencies, cash and cash-like instruments
Although the US dollar is pegged as the most dominant reserve currency of the world, fund managers are wary of its volatility in recent months.
McMillan said: “The dollar has shown episodic weakness in risk-off episodes. We expect further downward pressure from prospective Fed rate-cuts and, longer-term, diminishing foreign inflows as investors may reallocate capital away from the US and/or increase hedge ratios on existing US assets.
“We are similarly selective on use of other foreign exchange (FX) havens such as the Swiss franc and Japanese yen given the number of structural and technical factors in play.”
In contrast, McIntosh-Whyte said that, as a sterling investor, the US dollar remains an “excellent” safe haven.
“Whilst the current US administration has perhaps dampened its appeal, in the vast majority of risk-off environments I still expect the dollar to help UK investors – from UK economic weakness and political uncertainty to geopolitical risk and global growth scares,” he said.
Cash also continues to have an important role to play in defensive allocations, offering capital stability and liquidity.
“Although cash rates are now falling in the US, UK and the eurozone, yields remain above inflation and are attractive by recent historical standards – in 2026, liquidity itself has become an increasingly valuable defensive characteristic,” Walsh said.
For pure capital preservation in acute risk-off events, McMillan said she sees the most reliable defence in major sovereign bills, short-dated notes plus agency/supranational paper and high-quality money-market exposure – “where depth and nominal stability matter most”.
Diversification is key
Ultimately, fund managers agreed that there is no one safe-haven asset that will protect investors from all possible risks. As such, diversification is the preferred formula.
Walsh said: “There is need for a broader toolkit rather than reliance on any single defensive asset, so we look globally across a range of different asset types in search of such protection.”
Artemis’ Gibb added he has shifted his mindset from asset labels to the underlying characteristics that drive resilience, such as valuation discipline, income generation and real (rather than nominal) returns.
“In short, we think about defence in terms of what an asset is worth today, not what it has historically been called,” he said