Yes A checkmark with a circle around it close
View from top of a suspension bridge over water

Investment Strategy

Published June 30, 2025 | 10 min read time

Weekly market insights and possible impacts on investors from the Wells Fargo Investment Institute Global Investment Strategy team.

Download full report (PDF)

Asset Allocation Spotlight: Seek stability through diversification

  • We believe diversification remains key for investors seeking to navigate through turbulent geopolitical conflicts rattling global markets.
  • We favor high-quality assets such as U.S. Large Cap and Mid Cap Equities. We believe fixed-income assets can serve a diversification function, potentially cushioning the downside as investors maintain exposure to risky assets to gain from potential upside.

Equities: Retesting the highs

  • The S&P 500 Index has recovered from its recent losses and now sits back close to its 2025 highs.
  • We believe investors would do well to rebalance portfolios back to recommended allocations, which may include trimming equities and rotating the funds into fixed income.

Fixed Income: CMBS market holds steady, but headwinds linger

  • The commercial real estate (CRE) sector remains under pressure as rising delinquencies, falling asset prices, and softening fundamentals weigh on investor sentiment.
  • Despite these challenges, commercial mortgage-backed securities (CMBS) spreads have remained surprisingly resilient — particularly in higher-rated tranches, tracking closely with investment-grade (IG) corporate credit.

Real Assets: Keeping it all Strait (of Hormuz)

  • We believe a full shutdown of the Strait of Hormuz is highly unlikely, and the recent Israel-Iran truce suggests the risk of such a scenario has fallen even further.
  • We believe overweighting the Energy equity sector as well as the Commodities asset class with exposure to gold and oil provides attractive hedges against this and other geopolitical risks.

Alternatives: Favored hedge-fund strategies had a solid start to 2025

  • Over the first five months of 2025, our favorable hedge fund sub-strategies including Macro – Discretionary, Equity Hedge – Directional, Relative Value – Long/Short Credit, and Event Driven – Distressed Credit generated positive returns and outperformed the global hedge-fund composite.1
  • Looking forward, we continue to prefer these strategies as macroeconomic and policy landscapes evolve.

1 Please see the end of the report for the definitions of the indexes for each strategy and risk considerations.

Article written by:

Global Investment Strategist
Head of Global Equities and Real Assets

Global Fixed Income Strategist
Investment Strategy Analyst
Global Portfolio and Investment Strategist