Building All Weather Portfolios for a New Macro Regime

June 2025

There’s no shortage of major issues in markets to debate right now.

Is the era of U.S. exceptionalism over? Will the U.S. face a fiscal crisis? Does a deglobalized world mean structurally higher inflation for years to come?

Countless hours will be spent debating these themes. It’s part of the intellectual intrigue of investing. But for those tasked with preserving and compounding capital across generations, one thing is clear: portfolios need to be robust enough to navigate uncertainty, not optimized for a single forecast.

That’s the core idea behind all-weather portfolios— building resilience across macro regimes, rather than relying on precise predictions. It is easier said than done.

The 60/40 portfolio was ideal for the 40-year disinflationary boom from 1980 to 2020. Both equities and bonds benefited from falling inflation, and the negative correlation between them helped limit volatility and drawdowns.

But in 2022, the 60/40 model—long the default for “balanced” investors—was exposed as brittle, not balanced. With both stocks and bonds falling sharply, portfolios were left without a natural hedge. This wasn’t just bad luck. It was a failure of diversification by design.

Could we return to a disinflationary environment that supports both stocks and bonds, with a negative correlation between them? It’s possible.

But relying on that outcome comes with risk—the risk of repeating episodes like 2022 or facing variants we haven’t yet imagined.

From Asset Allocation to Risk Allocation

Advisors often recommend diversification by asset class, but that can create an illusion of diversification.

Many portfolios—despite holding a variety of assets—remain dominated by equity beta and duration risk.

For example, consider the typical family office allocation from the UBS Global Family Office report:

Having exposure to public equity, private equity, credit, and private debt may feel diversified—but

in a deep recession, how many of those are likely to deliver positive returns?

Correlations that appear low in benign environments often converge under stress.

A true all-weather approach starts by asking:

• What risks am I actually holding?

• What environments am I prepared for?

• Can my portfolio survive scenarios I haven’t even imagined?

That requires macro regime awareness. Inflationary booms, disinflationary busts, stagflation, policy shocks—each demands different characteristics. And there may be variations we haven't yet seen.

The goal isn’t to time regimes, but to be prepared across them.

To build something more durable, investors must shift from asset labels to underlying risk drivers and macro exposures. Allocating meaningfully to real assets like commodities—which can perform during inflationary shocks—is a good first step.

But a portfolio built entirely from long-only strategies is inherently constrained. It limits your ability to respond to a wide range of market environments.

True resilience comes from combining traditional exposures with strategies that behave differently when the world changes. 

That means going beyond low correlation and seeking strategies with positive convexity in adverse conditions.

The Case for Global Macro and Managed Futures

This is where global macro and managed futures come in. These strategies offer what most portfolios lack: the ability to go short, adapt dynamically, and access return streams that are structurally distinct from long-only assets.

Trend-following strategies respond systematically to price action across a broad universe—commodities, currencies, interest rates, and equities—without the behavioural drag of discretionary decision-making. While choppy markets have challenged trend strategies this year, they have historically delivered strong performance during sustained bear markets.

These approaches also provide access to underrepresented markets such as agricultural commodities, power markets, and emerging market FX—areas traditional 60/40 portfolios rarely touch.

Global macro managers—whether discretionary or systematic—can exploit volatility, rate differentials, and commodity dislocations that conventional portfolios often ignore. The best discretionary macro managers combine deep macro insight with the flexibility to navigate shifting regimes and identify asymmetric opportunities.

What matters most isn’t prediction, but adaptability and robust risk management. 

It’s not just that these strategies are uncorrelated with equities—it’s that they have the potential to deliver performance and convexity precisely when traditional assets struggle.

Return Stacking: Capital-Efficient Diversification

Allocating to diversifying strategies has often meant reducing equity or bond exposure—an unattractive trade-off for many.

Futures markets allow a more elegant solution: return stacking.

By gaining core market exposure through futures—say, to the S&P 500 or MSCI World Index—investors can free up capital to allocate to diversifying strategies without compromising their strategic exposures.

But stacking returns also means stacking risk. It requires thoughtful sizing, a clear understanding of strategy behaviour across regimes, and a tolerance for tracking error versus conventional benchmarks.

As Howard Marks puts it

“Unconventionality is required for superior performance. You can’t hope to earn superior returns if you’re just doing what everyone else is doing.”

Strategy Selection and Portfolio Construction

One of the key challenges in macro and quant is selection—of managers, strategies, and vehicles.

Thousands operate under the “global macro” label, but their styles vary significantly. They differ in market focus, risk allocation, and the likelihood of delivering the convexity investors need from diversifying strategies.

That’s one reason we’ve produced a guide for family office and institutional investors building diversified, multi-manager macro portfolios.

https://archive-capital-144166747.hubspotpagebuilder.eu/the-case-for-global-macro-today

The key is to move beyond surface-level performance and ask:

• What environments does this strategy excel in?

• What are the implicit bets?

• What role does it play—hedge, diversifier, or return engine?

Preparing for the Unknown

The next shock won’t look like the last. That’s the nature of shocks. But a well-constructed all-weather portfolio doesn’t need to predict the future. It needs to be ready for multiple futures.

For family offices and long-horizon investors, the goal isn’t to beat benchmarks quarter by quarter.

It’s to preserve and grow capital across cycles—through inflation and deflation, booms and busts, policy shifts and market disruptions.

That requires a portfolio that is diversified by risk, not just by asset class. 

A portfolio that blends long-only assets with strategies that can go short, respond dynamically, and access differentiated sources of return. A portfolio that can absorb volatility—and sometimes benefit from it.

That’s the essence of all-weather investing. Not a static allocation, but a thoughtful framework. One that recognises uncertainty, embraces adaptability, and is built to endure.

That’s the mindset of the all-weather investor.

The information and commentary presented in this website by Archive Capital is of a general nature for information and education purposes. It is not to be used or considered as a recommendation to buy, hold or sell any securities or other financial instruments; and does not constitute an investment recommendation or investment advice.

This material is: (i) for the private information of the reader, and Archive Capital is not soliciting any action based upon it; (ii) not to be construed as an offer or a solicitation of an offer to buy or sell any security in any jurisdiction where such an offer or solicitation would be illegal; and (iii) based upon information that Archive Capital considers to be reliable.

The information in this website has been obtained from sources believed to be reliable, but its accuracy and completeness have not been verified and are not guaranteed. The opinions, estimates and projections constitute the judgment of Archive Capital and are subject to change without notice.

Archive Capital does not warrant or represent that the information is accurate, complete, reliable, fit for any particular purpose or merchantable; and does not accept liability for any act (or decision not to act) resulting from the use of this information and related data.