Global equities have shown resilience, but risks persist—from geopolitical uncertainty and intensifying AI competition to elevated fiscal deficits. In this environment, we see value in locking in gains where appropriate, de-risking select exposures, and using capital preservation strategies to help manage downside risk.
Locking in gains for transformational innovations
After a strong rally in transformational innovation-linked stocks—especially AI, semiconductors, and select single companies—investors may want to lock in some gains. Structured investments can help crystallize returns while maintaining some upside exposure, whether in individual stocks or on an index level.
Derisking while maintaining exposure
For areas that have held up well but remain cyclical, richly valued, or exposed to shocks (such as energy or geopolitics), investors can consider derisking by shifting toward more defensive sectors, diversifying across regions, or using structured strategies with built-in downside buffers. Capital preservation strategies can be customized for tenor, loss avoidance, and participation, allowing investors to tailor the degree of protection and upside. Variants such as “bearish” and “twin-win” strategies offer flexibility for different market views and can help investors stay invested during downturns, reducing the temptation to sell and lock in losses.
Taking advantage of falling volatility
Falling implied volatility—especially in US, EU, and Swiss equity indices—makes capital preservation strategies more attractive. The sharp move higher in many governments’ shorter-dated bonds has made zero-coupon structures cheaper, increasing the capital available for options and thus participation in market gains. However, investors should monitor implied volatility, as higher option prices can reduce participation rates. When volatility is low, capital-preservation strategies can offer more compelling upside participation while helping limit losses.
