Market's Getting Jumpy—Here's How Smart Investors Stay In Without Losing Sleep

Mint

2 days ago

The U.S. equity market has spent most of 2025 climbing steadily higher. The S&P 500 crossed the 6,300 mark in July. tech-heavy indices like the Nasdaq continue to deliver gains, bolstered by AI optimism and strong corporate earnings.
But beneath the surface, momentum is thinning. The breadth of the rally, measured by how many stocks are participating, is narrowing. Defensive sectors are beginning to attract capital. And options pricing suggests that traders are starting to hedge, not chase.
Volatility, while still contained, is starting to show up again in daily moves. The VIX, long dormant below 14, has crept higher. And with a fresh round of tariff risk hanging over August markets, institutional positioning is shifting toward caution.
If you're sitting on a ₹ 5 lakh U.S. equity basket, the impulse might be to book profits or reduce exposure. But stepping out too early can break compounding. This is where smarter investors focus, not on exiting, but on staying in with better safeguards.
Every mid-year has its themes. This one carries more than usual:
As of mid-July, the S&P 500 trades at a forward P/E of around 21.3x, well above its 10-year median of approx. 18x. Even more stretched are the largest tech names, some of which are pricing in multi-year growth without room for error.
With U.S. elections approaching, trade tensions have resurfaced. Reports suggest that tariff proposals on China, possibly exceeding 60% on some categories, could re-enter policy discussions in August. Market reactions to these events are rarely subtle. Sectors tied to supply chains, semiconductors, and consumer electronics may face headline risk.
Historically, late July into early August is a seasonally weak stretch for U.S. equities. According to CFRA Research, the S&P has averaged flat to negative returns during this window over the past 15 years. In 9 of those years, markets pulled back meaningfully by the third week of August.
Yields on the U.S. 10-year Treasury have edged back toward 4.3%. While this is not high by historical standards, it does create a competitive alternative to equities, particularly when tech valuations are under pressure.
Put together, the message is not 'panic', it's 'prepare.'
If your U.S. equity exposure is tied to large-cap growth stocks, or to sector ETFs with high beta, these swings may already be visible in your portfolio. The problem isn't being invested, it's being unhedged.
Most Indian retail portfolios are not designed with volatility management in mind. But that doesn't mean it's complicated. With the right tools, you can stay exposed to upside while reducing the emotional and financial whiplash of short-term drawdowns.
Let's look at what that actually looks like.
Guardrails aren't about eliminating risk. They're about creating structure around it, so you don't react impulsively when markets shift. Here are five principles investors are using to manage exposure without stepping out:
Every investor has a pain point, when short-term losses begin to impact long-term decisions. Identifying it before volatility rises is essential. For example, if a 10% drawdown on your ₹ 5 lakh U.S. allocation feels manageable, set soft alerts at the 5% and 7% levels. This lets you evaluate risk in stages rather than all at once.
Long-term investments shouldn't be subject to constant toggling. But for satellite positions, like sector ETFs or mid-cap AI stocks, it makes sense to use stop-loss orders. These act as automated guardrails, protecting capital during sudden drawdowns while keeping you invested until the signal flips.
If you're tracking small-cap tech or thematic bets, tools like trailing stop orders or conditional sell triggers can help you stay disciplined.
A portfolio can look diversified by sector, but still carry concentrated volatility exposure. For example, owning Nvidia, Microsoft, and Amazon spans different industries but their price reactions to macro events are often similar.
One solution is to add instruments designed to behave differently in turbulent markets. These include: Low-volatility ETFs (e.g., SPLV, USMV)
Dividend-weighted ETFs (e.g., VIG, DGRO)
Short-duration bond funds (e.g., SHY, BIL)
These instruments tend to move more slowly when markets fall and help cushion drawdowns without cutting equity exposure outright.
If the risk is macro-driven, like tariffs, Fed decisions, or bond market swings, then it makes sense to treat macro-sensitive sectors differently. Industrials, consumer cyclicals, and semiconductors often react sharply to headline changes.
Platforms like Appreciate offer access to sectoral ETFs and thematic portfolios that reflect these macro linkages. Instead of cutting back your entire allocation, consider adjusting sector weights or diversifying within these themes to respond more precisely to macro stress.
For investors with new capital or dividend proceeds to reinvest, consider staggered entry. Use 2–3 tranches over a few weeks instead of committing all at once. This is especially useful during periods like July–August when volatility is often event-driven and not fundamentally linked to earnings.
Here's how key indicators have moved over the last month:
Indicator July Trend Notes S&P 500 +2.9% (YTD 8.11%) Gains remain concentrated in tech VIX (Volatility Index) Up from 13.2 to 15.4 Signaling rising hedging activity 10-Year U.S. Treasury Up to 4.29% Bond yields creating a drag on equity valuations Nasdaq Composite +3.6% Still strong, but increasingly choppy intraday Russell 2000 +4.7% (since mid-June) Small-caps outperforming—but with higher variance
The rise in the VIX and bond yields isn't extreme but it's enough to reset positioning. For investors tracking this data weekly, the signals are clear: caution is replacing complacency.
Just as important as what to do, is what to avoid: Do not exit your portfolio entirely—timing re-entry is harder than riding out short-term noise
Do not react to headlines without checking exposure—not all news affects all holdings equally
Do not use cash as your only shield—diversification within asset classes can reduce volatility without halting returns
Preserving compounding requires confidence. And confidence grows with structure.
The Appreciate app is designed for these moments, not just to help you invest, but to help you invest through volatility. Here's how: Easy access to U.S. stocks, ETFs, and mutual funds for Indian investors
₹ 0 subscription fees and a minimum investment of just ₹ 1
0 subscription fees and a minimum investment of just 1 Allows fractional investing in top global compa nies
Provides stock recommendations tailored to your goals using AI
One-click INR to USD remittance built into the platform
Portfolio insurance up to $500,000 via SIPC, covering broker failure—not market losses
Real-time fraud alerts with 24/7 activity monitoring
Fully compliant with RBI, IFSCA, and FEMA regulations
You don't need to overhaul your strategy. You just need to layer in support that works when the market stops cooperating.
Let's say you've got ₹ 5 lakh in U.S. exposure today. A sample diversified structure might look like this:
Asset Type Suggested Allocation Objective Core U.S. Equity ETFs (SPY, IVV) ₹ 2,00,000 (40%) Long-term compounding Thematic Stocks (AI, Infra) ₹ 1,00,000 (20%) Growth-focused alpha Low-Volatility or Dividend ETFs ₹ 75,000 (15%) Cushion against market shocks Short-Term Bonds / T-Bills ₹ 50,000 (10%) Defensive income Tactical Cash / Dry Powder ₹ 50,000 (10%) Flexibility during volatility Volatility Hedge ETF (VIXY) ₹ 25,000 (5%) Direct risk offset
This kind of structure lets you stay in the market but with shock absorbers. It doesn't dilute returns. It manages the path.
Strong markets can make you forget risk. But volatility always returns, usually just as investors start feeling comfortable. What separates long-term success from short-term regret isn't who called the top. It's who stayed prepared without pulling out.
You don't have to abandon your U.S. allocation. You don't have to guess what the Fed or the next headline will do. You just need to install smart guardrails that let your portfolio breathe without losing direction.
Because the best investors aren't just in the market. They're in the market with a plan.
To know more about investing in US stocks, ETFs and Mutual Funds, click here
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