Uncertainty looms as 2025 nears the halfway mark. How to make sure your portfolio is prepared

CNBC

10-06-2025

Stocks have made a recovered from this year's lows, but uncertainty remains a key theme as the second half of the year approaches – and investors can prepare for it. President Donald Trump's rollout of sharply higher tariffs in April sent stocks on a wild ride, with the S & P 500 at one point dipping more than 20% from its all-time high. Traders' hopes for progress in trade negotiations, along with solid first-quarter earnings, helped the market recover since then, however. The S & P 500 is now less than 2% below its its all-time high. Don't just kick back and wait for a continued recovery, though. "Our little tagline here is 'diversifying for resilience,'" said Michael Arone, SPDR chief investment strategist at State Street Global Advisors. "The thought behind the theme for the second half, is that markets are in suspense," he said. Some of the issues for investors to cinsider now include trade policy, soft economic data and the chance that the Federal Reserve holds off on rate cuts for too long, Arone added. Here's how to get your portfolio ready for the remainder of the year Review and rebalance Ignoring your portfolio's asset allocation, particularly at a time when markets are strong, can result in lopsided positions. For starters, think about how large-cap tech stocks in the U.S. were responsible for the market's surge last year. Failure to prune some of those big positions now, and add to underweight sectors, could result in a portfolio that doesn't reflect your goals and risk appetite. This year, investors who shied away from international markets may have found themselves missing out on sizable appreciation. Consider that the Vanguard FTSE All-World ex-US ETF (VEU) has returned 16% in 2025, while the S & P 500's return over the same period is a little more than 2%. VEU .SPX YTD mountain The Vanguard FTSE All-World ex-US ETF (VEU) versus the S & P 500 in 2025 "If we look through a stock lens, U.S. allocation peaked at 67%, and today it's at 64%," said Arone. "I can tell you there are very few investors I meet with who have 36% of their portfolio invested outside of the U.S. from a stock standpoint." Diversifying into international funds also helps investors gain exposure to sectors outside of Big Tech, said Christine Benz, director of personal finance and retirement planning for Morningstar. "The U.S. is still very tech dominated and growth leaning, but broad non-U.S. indexes are dominated by financials and health care. It's a different set of market components relative to the U.S." Benz likes the idea of investors using a broad global stock benchmark as a guide to determine how much to invest overseas, noting that the split is generally about 60% toward the U.S. and 40% non-U.S. Reassess your goals and risk appetite The market's slide in April might have been a good chance for investors to do a gut check of whether their asset allocation reflects the risk they are willing to take. "My big [issue] is the value of derisking for people who are getting close to retirement," said Benz. "It might not have felt like a great idea to derisk in the throes of tariff-related market losses, but now stocks have clawed their way back into positive territory." Investors who are nearing retirement might want to consider adding safer assets to their portfolios to take advantage of today's higher yields, she added. "Consider taking advantage of the fact that yields are decent today and it will translate to better returns for fixed income versus when yields were very low," said Benz. For savers in retirement plans, this can also mean reviewing where you're directing your contributions. "Let's say you're not ready to retire, but retirement is in the next five to 10 years," said Marguerita Cheng, CFP and chief executive officer of Blue Ocean Global Wealth in Gaithersburg, Md. "You can have some of your existing dollars in something a little more conservative, and when you dollar-cost average you can be a little more growth oriented," she said. Dollar-cost averaging refers to making incremental investments into a certain asset at fixed intervals, say every two weeks, every month or every quarter. By spreading out these investments, you're buying into stocks at different prices over time, instead of trying to wait for the "right" time. Tax-loss harvesting Tax-loss harvesting opportunities may await investors who have taxable brokerage accounts. This involves selling losing positions and using the realized losses to offset gains elsewhere in the portfolio. Be sure to avoid violating the wash-sale rule, which involves selling an asset at a loss and then buying a "substantially identical" security within 30 days before or after the transaction. In such cases, the IRS can block you from taking the loss. Lagging stock sectors this year include energy, health care and consumer discretionary, which might all be solid contenders for tax-loss sales. "Investors with individual stocks, sector funds or ETFs might have an opportunity to take a tax loss in those areas," said Benz.