New York morning trade.
We are looking at the major US stock averages selling off.
The equities have seen incredible momentum recently, and they are now facing immense pressure from a Fed warning about upside inflation as well as a shaky ceasefire between the US and Iran at the same time, recent shocks to risk assets have exposed flaws in popular hedges.
We've seen crypto a lot harder than equities and the traditional 60-40 portfolio just continue to face correlation headwinds and as we navigate these complexity.
Investors are realizing they need portfolios that don't necessarily rely on guessing the next move or the exact geopolitical outcome.
Well joining us live here at the New York Stock Exchange to discuss how to build true resilience in this environment is Paisley Nardini, who's managing director and head of multi-asset solutions at Simplify asset management.
Well great to have you here.
Good morning and thank you so much for joining us.
Thanks for having me.
Well, if we take a step back, it's been quite the volatile first half of 2026 and.
Reminder of how volatile markets can be.
We're seeing a tech sell-off not just in the US but also overseas.
So how should investors actually be positioning themselves and their portfolios so that they're protected from some of this volatility out there?
So what we saw coming into this year was a lot of complacency, and I think what you've shown and what you've just described is really the last 6 months has really started to uncover some of these complacent pockets within the market.
So as an investor, you really start to ask, am I.
Reaching for that kind of final return or the final innings of really this upside that we've experienced over the last 3 to 5 years in this bull market, or do I want to be a little bit more prudent in how I think about risks, and I think this directly relates to what we're seeing within the tech trade and the AI trade, and that's exactly what we're seeing this morning is markets are priced for perfection.
And so do you really want to extend yourself, or do you want to say, hey, I can stay in the market but perhaps participate a little bit more prudently building more.
Portfolios as I've alluded to, and how do you do that?
You really move beyond just the traditional concentrated stock bond model and it's not an overhaul and that's where I think a lot of investors get concerned.
If you want to build a resilient portfolio, do you have to start from scratch?
The short answer is no.
It's maybe taking some gains at the margin.
It's adding some diversifiers on the edges, and it's really thinking about where are the hidden risks and how concentrated is my portfolio actually.
So for viewers who are watching right now and they're looking at.
All the ups and downs across all asset classes, we know that 2026 we've seen all sorts of headlines driving the market.
So what does diversification and portfolio building actually look like when you break it down?
We've moved from what I would say is a growth oriented market as like the main macro risk factor to one that's inflation driven.
And so how do you think about navigating that is the first question.
Some responses to that?
How do you kind of tweak or make some Adjustments at the margin within the portfolio, it's looking for sources of risk that can not only weather in an inflationary regime but actually thrive.
And so rather than just having lower risk, how can you actually hedge your portfolio?
What we've seen really play out in just the year to date period is trend following, which is managed future strategies going a little bit more flexible and dynamic and being able to go fully long and fully short is really how you can navigate this market more directly thinking about what we've seen earlier this.
Here is some play within hard assets or commodities.
Gold and silver were early raliers this year.
That obviously is even fading a little bit even more this morning.
Infrastructure, I think, is a theme that if you really love the technology play and the AI data center buildout, but you're concerned about inflationary risks and concentration in a tech portfolio, maybe moving into infrastructure because we're starting to see the buildout and those hard assets have to be put up to really navigate and support this data center.
You mentioned inflation as well as commodities, and we know that heading into this year on the heels of the three straight years of double digit gains for the major US stock averages, there was some complacency, and we wouldn't have expected that spike in energy leading the gains for the S&P 500.
But here we are about to head into the second half, and I do want to get your take on what we're seeing in digital assets, in particular crypto, because that risk asset.
Isn't performing so well.
So how are you looking at digital assets right now?
I love that you referred to it as a risk asset because I think that's where a lot of investors are still maybe confused.
How does crypto, how does Bitcoin maybe in particular or Ethereum play into a broader portfolio, and I think a lot of investors view that as your diversifier or your alternative exposure, and it is unique in the sense it's not necessarily driven by safe fundamentals, but exactly as you just outlined, crypto has become a risk asset.
And so how do you size that?
How do you think about that with portfolios because it's essentially been cut in half since where we were last fall.
I'm still a believer in having crypto within a portfolio sized appropriately, whether that be say 3 to 5% in a broader portfolio, but the volatility we've seen is something the investors should be really thoughtful of.
There's also a lot of dynamics in the market, especially given technical supply demand essentially that's driving Bitcoin prices lower, but I don't think all hope is lost for crypto.
And as we look at the second half, look ahead to the second half of 2026, there are a lot of questions about the US economy as well as the global economy as we move forward and as we see this rotation away from this concern on geopolitics and focus on energy, of course we don't have a crystal ball, but when it comes to the economy, where do you stand and what are your expectations?
Should we be concerned about inflation, recession, stagflation?
What is your take?
I don't believe that we're headed for an all-out recession.
I do believe like a normal, healthy market environment, we will probably see some type of retracement or pullback in the markets, and that's exactly kind of what we're starting to see today with some of the sell-off that's concentrated in the markets that have run up the most.
And so as an investor, how do you think about the biggest risk?
How do you shield your portfolio from those over the next 6 months?
I would say inflation will continue to be front and center, and more importantly, how the Fed chooses to navigate that will have ramifications for.
More broadly, so I think paying close attention to any communication hopefully that provides us.
I know he said that communication might be pulled back a bit, but I think that's the wild card and as markets adjust and reflect and reprice whether it's cuts as it was a couple of months ago, it's now moved to hikes.
I think we're just trying to digest and we're in a bit of a wait and see period which I think over the next couple of months we'll have a little bit more clarity on that.
Yes and Paisley, I think you have highlighted the fact that we have to keep our attention.
So many moving parts here.
So when it comes to the leaders as well as laggards, what do you think is important to pay attention to below the surface?
I'm still a huge proponent of having technology exposure within the portfolio from a just a pure fundamental growth narrative.
Technology earnings are still not only are they meeting, but they're beating expectations.
I think that maybe a safer way to play that, however, is rather being in a hyper concentrated as we've seen in South Korea this morning in the selloff or even within the US technology.
Sector maybe a more equal weighted approach because there's a lot of companies and earnings reports below the surface that are not getting a lot of attention that are delivering and beating expectations.
So again this goes back to that prudent participation.
How can you stay in the market and still ride the key themes or narratives that are playing out in the economy today and do so in a way that you can kind of put your head nicely on a pillow at night and have to not have to stress about being overly concentrated.
Well Paisley, we will have to leave it there for today, but thank you so much for joining us in person here at the New York Stock Exchange.
Thank you.
