Wall Street’s largest institutional investors are bracing for a prolonged period of volatility, and gold has emerged as the cornerstone of their defensive strategy.
As geopolitical uncertainty deepens and recession fears intensify, professional money managers are moving decisively to reduce risk, reallocate capital, and fortify portfolios against potential shocks. For wealth advisors and RIAs, these institutional positioning trends provide important cues about managing client assets in what could be a difficult and prolonged downturn.
According to Bank of America's most recent Global Fund Manager Survey, conducted between April 4 and April 10—coinciding with the height of market turbulence triggered by tariff announcements—global investor sentiment has cratered.
The survey, which aggregates responses from portfolio managers overseeing hundreds of billions in assets, found that expectations for global economic growth have collapsed to levels not seen in three decades. An overwhelming 82% of respondents now forecast a weaker economy in the coming year, a striking reversal from the optimism that characterized much of the post-pandemic recovery.
The catalyst for this dramatic sentiment shift is the return of trade tensions, with the Trump administration's renewed tariff agenda rattling both equity and fixed income markets. Although some market participants still see the administration’s actions as tactical moves in a broader negotiation strategy, others are preparing for a more permanent policy shift that could have sustained implications for global trade, corporate margins, and consumer purchasing power.
In response, institutional investors are rotating away from risk assets and repositioning defensively. Most notably, a growing consensus has formed around gold as the top-performing asset in the year ahead. In the April survey, 42% of fund managers named gold as their highest-conviction bet for 2025.
That marks a significant rise from 23% in March, indicating that enthusiasm for the metal is broadening rapidly across the institutional landscape. Gold’s appeal in this environment is no mystery. With inflation fears still lingering, central banks recalibrating policy, and investors anxious about equity drawdowns, gold offers perceived safety, liquidity, and insulation from both monetary and geopolitical shocks.
For RIAs advising high-net-worth clients, the renewed institutional embrace of gold may merit strategic consideration, particularly within diversified portfolios seeking ballast against market stress. While gold doesn’t generate income, its historical role as a store of value during systemic downturns remains compelling, particularly when investor confidence deteriorates as swiftly as it has in recent weeks.
Beyond gold, institutional investors are undertaking a broader recalibration of their allocations. Equities—especially U.S. stocks—are increasingly falling out of favor. The April survey showed a continued net underweight position in U.S. equities, with fund managers citing overvaluation and earnings risk in a high-tariff environment.
Technology stocks, once the market’s standout performers, are seeing particularly sharp outflows as managers rotate into sectors viewed as more resilient or less economically sensitive. The market’s previous enthusiasm for growth-oriented narratives—whether tied to artificial intelligence, platform monopolies, or speculative innovation—appears to be giving way to a more cautious, valuation-driven approach.
Instead, institutional capital is flowing into what many describe as a modern bear-market survival kit. This includes elevated allocations to cash, alternative assets, defensive equity sectors, and short-duration fixed income. In particular, cash positions among global fund managers are hovering near multiyear highs, reflecting both defensive posturing and opportunistic flexibility.
For wealth advisors, this trend underscores the importance of preserving liquidity and maintaining the ability to rebalance portfolios dynamically as new market data emerges.
Fixed income allocations are also being reexamined. While longer-duration bonds face duration risk in a rising-rate or inflationary environment, short-duration instruments have gained favor for their relative insulation from rate volatility. With interest rates still elevated compared to much of the past decade, high-quality short-term debt is once again a viable component of income-oriented strategies.
Another critical element in the institutional response to rising volatility is the move into alternative assets. Allocations to private credit, infrastructure, and real assets continue to gain momentum as managers seek sources of uncorrelated return and inflation protection. While these strategies often involve reduced liquidity, they offer diversification benefits that are increasingly attractive amid a macro backdrop marked by fragility and policy unpredictability.
The broader message from institutional investors is clear: the economic environment is shifting, and traditional portfolio construction frameworks are being revisited. Trade policy is now a central macro risk, not a background concern. As tariffs drive input costs higher, compress margins, and disrupt supply chains, the path to stable growth appears increasingly uncertain. In this context, the playbook that rewarded equity-heavy portfolios with a strong U.S. tilt may no longer deliver the same results.
For wealth advisors, the takeaway is not simply to chase the institutional crowd but to thoughtfully interpret what their positioning reveals about evolving market risks. Rising allocations to gold, short-duration bonds, and alternative assets speak to a desire for downside protection, capital preservation, and reduced correlation to public equity markets. That mindset may resonate strongly with clients seeking to de-risk or reposition ahead of further market turbulence.
At the same time, client communication becomes more important than ever. Many high-net-worth individuals may still be anchored to the equity gains of the past decade or hold expectations that markets will swiftly rebound from any selloff. Advisors can play a critical role in framing the current environment, articulating the risks associated with renewed trade tensions, and explaining why diversification and strategic defensiveness are prudent.
Importantly, these defensive shifts are not a call to abandon long-term investing principles. Instead, they reflect the need to adjust short- and intermediate-term portfolio construction in response to specific and intensifying macroeconomic headwinds. Just as institutional managers are building optionality into their strategies, RIAs should seek to do the same—balancing near-term caution with long-term discipline.
A final point to consider is that the institutional preference for gold and other non-correlated assets is not necessarily a long-term bet but a reflection of the current regime shift. If trade tensions subside, inflation moderates, or central banks pivot more dovishly, risk assets could rebound quickly. But for now, the consensus among professional investors is that caution is warranted, volatility is the new norm, and portfolio flexibility is paramount.
As the macroeconomic outlook deteriorates and recession risk climbs, RIAs and wealth managers have an opportunity to guide clients with clarity, transparency, and strategic foresight. The institutional money managers surveyed by Bank of America are not reacting emotionally to headlines—they are acting decisively to protect capital, manage downside exposure, and position for a range of potential outcomes. Advisors who bring that same discipline to their client relationships will be better positioned to preserve trust, navigate volatility, and uncover opportunity amid the noise.
In conclusion, the takeaway from this latest institutional survey is not just a bet on gold, but a broader signal about how professionals are preparing for what could be a much rockier road ahead. Wealth advisors should treat this not as a reason to panic but as a valuable input for adapting strategies, reassessing client risk tolerance, and reinforcing long-term plans with a renewed focus on flexibility, resilience, and quality.
