Insights 
VT 
Markets are currently risk-averse due to High valuations and geopolitical risks. This has led asset allocators to re-evaluate country and sector exposures in anticipation of possible corrections.
Recent changes have primarily impacted trade and credit factors, with misaligned positioning under scrutiny. Earnings headwinds are also influencing the current cycle. In the coverage universe, nine out of 45 equity markets exhibit holdings scores over 20%. This is driven by firm prices and improving flow metrics.
Sector Holdings Overview
Holdings are notably concentrated in AI and technology sectors in both emerging and developed markets. In developed regions, semiconductors and equipment industries hold more than 20% above their twelve-month average. Materials, bolstered by gold prices, rank fourth in sector standings.
The auto industry shows strong holdings despite weak narratives for traditional automakers. China’s electric vehicle sector is experiencing different outcomes due to challenges. Materials exposures are sensitive to gold movements, supporting recent positioning. Overall, technology and materials sectors show concentrated strength, with notable auto sector participation amid risk-averse market conditions.
The FXStreet Insights Team compiles observations by experts and analysts. Issues like US-China trade and the US government status generate interest, with new economic data expected. The views expressed are those of the authors and do not reflect FXStreet’s official position.
With the market clearly shifting away from risk, traders should consider strategies that benefit from higher volatility. The VIX has climbed over 25 in recent sessions, a significant jump from the sub-18 levels we saw during the summer of 2025. This environment makes buying protective put options on broad indices like the S&P 500 a logical step to guard against further downside.
Investment Strategies Amid Volatility
We should be especially wary of the crowded trades in technology, particularly in semiconductors where holdings are historically high. While the VanEck Semiconductor ETF (SMH) has been a strong performer through mid-2025, the combination of elevated valuations and building earnings headwinds presents a risk of a sharp pullback. Bearish positions, such as buying puts on tech-focused ETFs, could prove timely as allocators begin to trim their overweight exposure.
Conversely, materials exposure remains firm, largely because of gold’s role as a safe haven. With persistent geopolitical risks dominating headlines, gold has solidly held the $2,450 per ounce level, providing a strong floor for related mining stocks. Traders could look at buying call options on gold ETFs to capitalize on this continued flight to safety.
The auto sector is showing signs of stress, especially related to the challenges in China’s electric vehicle market. Recent data from September 2025 showed a notable slowdown in EV sales growth in China, which will likely pressure the margins of exposed automakers. This suggests that put options on specific car companies with significant reliance on that market may be more effective than a broad negative bet on the entire sector.
Overall, the earnings outlook is becoming a concern, reinforcing a defensive posture. We have noted that analysts have revised fourth-quarter 2025 S&P 500 earnings growth estimates down in recent weeks, citing trade issues and slowing global demand. This backdrop supports derivative strategies that profit from either a market decline or simply a sustained period of choppiness in the weeks ahead.
