Riders on the storm: managing wealth through turbulence

Many investment firms talk about diversification of assets, but it is vital to also keep a keen eye on exposure to currencies.

In a world of extremes, holding on to wealth appears super-complicated and, like a bucking bronco, delivers a wild and uncomfortable ride. So how did we get here? The 2020s thus far have been defined by a sense that, in the words of William Butler Yeats from his 1919 apocalyptic poem The Second Coming, “the centre cannot hold”.

The UK’s rude awakening to having voted itself out of the European Union back in 2016 feels like a walk in the park compared to the convulsions we have seen more recently.

The first five months of 2025 have, with the return of president Donald Trump, seen trade wars declared and de-escalated over the course of an afternoon. Then there was DeepSeek’s explosion onto the AI scene that sent tech stocks tumbling. More recently, sabre-rattling on the India/Pakistan border has further fuelled the sense of uncertainty.

While trade deals struck by the US, China, the UK and India have served to calm nerves, political polling indicates that we are not yet out of the woods. And the recent US Treasury sell-off clearly demonstrates that the market is fast losing faith in future growth of the US economy.

It’s easy to get drawn into hyperbole when discussing world events and comparisons between, for example, the stockmarket crash of 1929 with that Covid-19 induced crash of 2020 are well worn. We all know what happened in the years following the 1929 crash and time will tell if we see similar dynamics play out in our own time.

Class decline

What is clear is that populism is on the rise, driven by stagnating economies and cost-of-living pressures. According to Pew, the American middle class has shrunk significantly in recent decades, with the same pattern played out across the Western world. There is no doubt that 1930s Europe experienced a similar middle class decline, eroding a demographic that is a traditional bulwark against political extremes. Or perhaps what we’re living through is more like the Cold War.

Mr Trump’s claim to fame prior to the presidency was co-authoring The Art of the Deal. Despite this, his much-vaunted peace deal in Ukraine has yet to materialise. In the meantime, the age of great power politics is back, with Russia increasingly willing to challenge Nato neighbours and China threatening Taiwan.

In reality, while comparisons to previous periods hold some water, 2025 brings its own unique circumstances. The challenge of climate change, for example, transgresses all borders and is immune to military threats. At the same time, disruptive technologies like AI promise to unleash untold efficiency and productivity, yet also threaten millions of jobs and — if Elon Musk is to be believed — pose an existential threat to humanity.

Compared to ‘killer AI’, climate breakdown and thermonuclear war, asset management might seem like an afterthought. But hedging against the many risks faced in 2025 is key to ensuring that wealth and retirement assets are not eroded by stockmarket panic and currency volatility.

So how do we predict the unpredictable and steer a course through the storm?

Safe havens remain a key destination for wealth. Goldman Sachs recently forecast gold to hit record highs in 2025, echoing similar historical spikes at other times of global uncertainty, including the 1930s and 1970s. Beyond gold however, there are several other key trends.

One ominous theme is the relative resilience of the high-end property market in New Zealand. The country has for a while been seen as a potential ‘bolt-hole’ for the wealthy. While recent stockmarket losses have dampened this market somewhat, diversifying into high-end properties far removed from centres of geopolitical disruption remains a key strategy.

Currency concerns

Whether it's gold or property, however, timing is key when faced with volatile FX markets. Recent months, for example, have seen the New Zealand dollar lose significant value against the US dollar, which could have major implications for those looking to invest in high-end real estate.

For traders, this instability represents an opportunity and institutional FX trading volumes soared 13 per cent in April 2025. The volatility we have seen in the first half of 2025 has made asset management more complicated and left many wondering how best to approach the rest of the year.

Diversification is always going to be the broad stroke answer to managing wealth through a period of volatility. Whatever the details of a diversification strategy however, currency volatility can have a significant and rapid impact on the logic of an investment.

It is therefore crucial that a diversification game-plan is underpinned by the FX strategies needed to ensure investments in new markets and geographies are efficient and effective. As we enter a period of relative calm following a tumultuous start to the spring, wealth managers should anticipate the next round of volatility now and develop strategies to maximise purchasing power and minimise risk. Precautions must be taken before, as Mr Yeats describes in his famous poem, “the darkness drops again”.

Rupert Lee-Browne, CEO, Caxton