Building for the Long Run through Calm and Crisis
In an environment of constant change, building resilient portfolios requires both a steady focus on long-term goals and the flexibility to respond to shifting conditions. Over the past three decades, Graham Capital Management has successfully navigated a range of disruptions, from rate shocks to financial crises, building a clearer understanding of what contributes to portfolio resilience. While each crisis is different, history offers valuable perspective.
Staying Anchored but Agile: Market stress often raises the question: stay the course or adjust? At the portfolio level, staying aligned with core investment objectives is important, as reactionary changes often do more harm than good. At the strategy level, however, active risk management is important: rebalancing exposures, adjusting positioning, or reducing risk as conditions evolve. This balance between long-term discipline and short-term agility is at the heart of resilient investing.
Conviction during Uncertainty: Maintaining exposure to diversifying, uncorrelated strategies can add meaningful value over time, especially during prolonged market drawdowns. And while even diversified, non-correlated approaches can struggle in the short run during sharp volatility spikes, history suggests that they realign with broader market trends during persistent dislocations. In past episodes like the dot-com bust, the Global Financial Crisis, and 2022’s inflation-driven drawdown, many diversifying strategies initially lagged but went on to deliver strong performance as trends took hold.
Explore the Timeline: This interactive timeline reflects on ten major market disruptions over 30 years. Use the interactive feature below for details on what happened, what we’ve learned, and how those lessons continue to inform our approach today.
Top Lessons Across Market Crises
What 10 Crises Taught Us About Building Resilient Portfolios
- Diversification Beyond Stocks & BondsAsset classes can fail in tandem. Diversifying strategies with low conditional correlation can add structural resilience.
[Relevant Periods: 2000, 2008, 2022] - Human Judgment in CrisisSystematic models are powerful when markets are stable and transparent. When markets are volatile and impacted by unprecedented or idiosyncratic events, data can be fragile and elusive, and discretion, experience, and intuition become important.
[Relevant Periods: 1998, 2010, 2020] - Active Risk ManagementIn fast-moving markets, flexibility in execution and thoughtful position sizing is critical. Dynamic risk management is as much art as science, requiring judgment and adaptability.
[Relevant Periods: 1998, 2020, 2023] - Operational ResilienceWhen liquidity dries up or counterparties face stress, operational soundness matters as much as strategy. Robust infrastructure, risk oversight, and execution frameworks form a critical line of defense.
[Relevant Periods: 1998, 2008, 2011] - Interest Rate SensitivityRate cycles can create ripple effects across asset classes. A resilient portfolio actively manages duration and avoids overconcentration in rate-sensitive exposures.
[Relevant Periods: 2013, 2022, 2023]
METHODOLOGY NOTES
The crisis events highlighted represent 10 major market disruptions since the inception of Graham’s trading in 1994. These events were selected based on the following criteria, though the list is not exhaustive and other crises may also have had meaningful impacts on investors:
Global and Historical Relevance: Events must have affected multiple asset classes, economies, or regions, extending beyond a single country or market. Each crisis is widely recognized as a pivotal moment in market history with broad relevance for investor portfolios.
Identifiable Catalyst: Each crisis must have a clear trigger—such as a policy shift, geopolitical conflict, or economic imbalance—that initiated the market disruption.
Lasting Impact: Selected crises either led to sustained market effects or caused immediate disruptions with broader systemic implications.
IMPORTANT DISCLOSURE
Source of data: Graham Capital Management (“Graham”), unless otherwise stated.
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