How Investors are Navigating Market Turbulence in 2025

Stock market volatility is nothing new, but 2025 has proven to be a year where investors are forced to rethink traditional strategies. The once-reliable playbook of riding mega-cap tech stocks to victory is being replaced by a more balanced approach, one that emphasizes diversification, high-quality investments, and strategic hedging.

As market turbulence continues, investors are adjusting their strategies, moving away from concentrated risk in a handful of overvalued names. Rather than placing all bets on a few high-growth stocks, diversified exchange-traded funds (ETFs) are gaining popularity as a means to hedge against single-stock risk. In addition, global markets—particularly in Europe, Asia, and Japan—are attracting fresh capital as investors seek to broaden their exposure beyond the US, Lale Akoner, Global Markets Analyst at eToro commented.

With corporate reforms in Japan and a growing number of undervalued opportunities in European equities, international exposure is back on the radar. This helps mitigate the concentration risk posed by the US market’s reliance on a small group of tech giants. “Investors are increasingly turning to global markets and diversified assets to build more resilient portfolios,” says Lale Akoner, Global Markets Analyst at eToro. “The shifting landscape in both the US and abroad is prompting a rethink in how and where to deploy capital.”

As part of this shift, the focus is returning to fundamentals. Investors who were burned by speculative frenzies, such as those seen with the Magnificent 7 tech stocks, are pivoting toward high-quality companies with strong balance sheets, resilient earnings, and dependable cash flows. The priority is now on substance over hype.

Sector rotations are also underway. Defensive sectors like healthcare, utilities, and consumer staples are experiencing renewed interest as investors look for shelter from market volatility. Financials, once beaten down by uncertainty, are showing signs of life, buoyed by rising net interest margins and an improving lending environment. Meanwhile, defense stocks are benefiting from a surge in global military spending, and clean energy continues to attract capital, driven by government incentives and long-term policy support.

Hedging remains a critical component in investor strategies. With lingering inflation concerns and shifting rate cut expectations, commodities like gold are once again taking center stage as a buffer. Bond ETFs are also making a strong comeback, offering steady income and portfolio stability amid continued market uncertainty.

Even cryptocurrency, once viewed as a high-risk asset, is regaining its place in the conversation. Bitcoin and Ethereum, as the dominant players with the largest networks, most adoption, and significant institutional backing, are emerging as safer bets for those seeking exposure to this emerging asset class.

“The days of mega-cap tech stocks single-handedly driving the market may be behind us,” says Akoner. “2025 is shaping up to be a year where broader leadership, quality, and strategic diversification take precedence. Investors who are able to play both offense and defense will be the most likely to succeed in this evolving market.”