Markets are currently cautious due to high prices and geopolitical tensions. As a result, asset managers are reassessing their investments in different countries and sectors in case of corrections. Recent changes have mainly affected trade and credit factors, prompting a closer look at positioning. Earnings challenges are also influencing the current market cycle. Among 45 equity markets, nine have holdings scores above 20%, largely due to high prices and improving metrics.

Sector Holdings Overview

Both emerging and developed markets are concentrating their holdings in the AI and technology sectors. In developed regions, the semiconductor and equipment industries are performing over 20% better than their average over the past year. Additionally, the materials sector, boosted by rising gold prices, stands fourth in the rankings. The auto industry has strong holdings, even with unfavorable news for traditional automakers. However, China’s electric vehicle sector faces unique challenges. The materials sector is sensitive to gold price changes, which supports recent positioning. Overall, technology and materials sectors show strong performance, with notable participation from the auto sector in this risk-averse market. The FXStreet Insights Team gathers insights from various experts and analysts. Topics like US-China trade relations and the status of the US government are in focus, especially with new economic data on the way. The opinions shared are those of the writers and do not represent the official stance of FXStreet. As the market shifts away from risk, traders should think about strategies that take advantage of increased volatility. The VIX has risen above 25 recently, a significant increase from the sub-18 levels seen in the summer of 2025. In this environment, purchasing protective put options on broad indices like the S&P 500 is a smart move to protect against further losses.

Investment Strategies Amid Volatility

Traders should be cautious about crowded trades in technology, especially in semiconductors with historically high holdings. While the VanEck Semiconductor ETF (SMH) has performed well through mid-2025, the combination of high valuations and increasing earnings challenges could lead to a sudden decline. Considering bearish positions, like purchasing puts on tech-focused ETFs, might be timely as managers start to reduce their overweight exposure. On the other hand, materials exposure remains strong, primarily due to gold’s status as a safe investment. With ongoing geopolitical risks, gold has consistently maintained the $2,450 per ounce level, which supports related mining stocks. Traders could consider buying call options on gold ETFs to benefit from this persistent demand for safety. The auto sector is showing signs of pressure, particularly from challenges in China’s electric vehicle market. Data from September 2025 revealed a slowdown in EV sales growth in China, putting pressure on the margins of automakers involved in that market. This suggests that put options on specific car companies heavily reliant on China might be a more effective strategy than betting against the entire sector. Overall, concerns about earnings are growing, reinforcing a defensive strategy. Analysts have recently lowered their fourth-quarter 2025 earnings growth estimates for the S&P 500, citing trade challenges and slowing global demand. This environment supports derivative strategies that can profit from either a market downturn or a prolonged period of volatility in the weeks ahead. Create your live VT Markets account and start trading now.

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