Can Market Volatility Create Opportunities for Investors?

In today’s global economy, headlines move faster than fundamentals, triggering sector rotations and currency swings faster than any analyst can model earnings impacts.

Take the VIX (CBOE Volatility Index), Wall Street’s “fear index,” which gauges market uncertainty. Normally, it hovers between 12 and 20; a level of 40 or higher is considered extreme. Last April’s “Liberation Day” tariff announcement brought a closing high of 52.33 – a number topped only by the collapse of Lehman Brothers and the pandemic-induced market crash.  

This historic volatility can be head-spinning for those thinking in the long term, with market whipsaws undermining traditional diversification strategies. 

“Investors are trading in milliseconds, reacting to the news cycle in real time,” says Racquel Oden, US Head of International Wealth and Private Banking.

In a world where whiplash is the new normal, building resilient portfolios requires navigating both seismic policy shocks and slower-moving tectonic shifts simultaneously. 

Consider artificial intelligence: While markets have fixated on tariff headlines, AI development is still accelerating globally at unprecedented speed, with 50% of S&P companies already using AI by the end of 2024. Investment continues to surge, and generative AI spending is forecast to hit $644 billion this year, according to Gartner, with AI infrastructure and services growing at 130%+ annually through 2028, according to HSBC. 

For portfolio managers, capturing AI opportunities now means shifting focus from upstream hardware to downstream adoption. 

The AI investment opportunity spans AI agents, smart robotics, autonomous driving, new medicines, computers and smartphones – extending far beyond US Big Tech, as the ecosystem develops across regions. Asian markets exemplify this complexity: China holds 70% of global AI patents, and Hong Kong and Singapore offer 4.0% dividend yields – double MSCI World’s 1.9%. 

As the ecosystem develops globally, US Big Tech is still susceptible to structural trends, and the sector’s performance remains lashed to the domestic economy’s performance. For that reason, portfolio managers must prepare for each of four economic scenarios: Goldilocks, Recession, Overheating and Stagflation.

“The challenge demands portfolio strategies that both capture long-term opportunities, while also  weathering short-term policy volatility,” says Oden. “When portfolios need to be positioned for such divergent outcomes, it requires active management and a deep understanding of sector trends.” 

Managing this dual challenge demands a fundamentally different approach to wealth management. “It’s a paradigm shift,” Oden says. “You need to rebalance on a continual basis.” 

For diaspora investors, the active approach isn’t just advantageous – it’s essential. These investors must leverage their cultural fluency and local market expertise to navigate regulatory arbitrage, while deploying multi-asset strategies to mitigate currency risks. They should capitalize on their understanding of regional dynamics to identify opportunities that purely domestic strategies miss, using active credit selection to generate yield even in uncertain times.

When supply chains reconfigure overnight and trade policies reverse within days, on-the-ground insights provide early warning signals that algorithmic models cannot capture – but investors must know how to translate insights into action.

This challenge underscores a broader strategic imperative for US investors. “They need to look at other parts of the world and consider a diversified strategy,” says Oden.

This trend appears to be underway. HSBC’s latest Affluent Investor Snapshot 2025 reveals that global investors have doubled their allocations to alternatives over the past year. They’re also putting more money to work, with these investors’ cash reserves decreasing by nearly 40% over the same period. 

A global investment perspective is essential, and active management can make the difference between being impacted by volatility or capitalizing on it.