4 strategies to manage volatility

Ongoing volatility and uncertainty is causing a broad change in sentiment from risk-on to risk-off among market participants, says Michael Keaveney, vice-president, managed solutions at CIBC Asset Management.

The main catalyst causing market volatility is the U.S. government’s tariff announcement, he said on the Advisor to Go podcast.

“There’s very little clarity, even now, around the initial rate of tariffs, where they will be imposed, and for how long,” he said. “Market participants generally don’t like that kind of uncertainty.”

Listen to the full conversation on the Advisor to Go podcast, powered by CIBC Asset Management.

Keaveney outlined four strategies that will help advisors better serve clients as volatility persists.

1. Document client goals

The most important strategy is to have well-document goals for client investments, Keaveney said.

“If you are on choppy waters in the lake, it’s much better to have sight of the shore or the lighthouse,” he said.

2. Diversify portfolios

Keaveney said having diversified portfolios with a mix of both bonds and equities is key.

“While bonds have been a bit more volatile in this environment, as well as the equity environment, they have done a better job at being balanced in the portfolio on days when equity markets are down,” he said.

And be sure to evaluate global equity markets, as well.

“Canadian and foreign equities have outperformed the U.S. markets,” he said. “In 2024, there was a strong impetus to think of the U.S. markets as the place to be — maybe to the exclusion of other markets. But times can change quickly, and a diversified approach really does sand the edges on overall volatility.”

3. Know that volatility is a recurring feature

While diversifying portfolios can reduce some of the risk, it will not entirely remove it, Keaveney said, adding that it’s important for advisors to incorporate client coaching in their approach, and focus on proactive communication.

“A trusted advisor knows the client, they know their goals,” he said, “and are in a unique position to cut through the noise and not just add to it.”

Advisors should have go-to resources that illustrate investment principles, he said, including “bouts of volatility over short periods, the value of diversification and the merits of taking a long-term approach.”

4. Implement low-volatility strategies

Adding low-volatility strategies to a broadly diversified portfolio is also important, Keaveney noted.

“They come in several varieties, but the common feature is to target a basket of stocks with favourable volatility expectations versus a broader market, either as individual stocks or as a group,” he said. “That, we think, can give a smoother overall experience for the clients, while still maintaining exposure to the stock market.”

Overall, Keaveney stressed the importance of clear client communication as volatility continues.

“Frame all of this communication in terms of how the portfolios are positioned for a variety of outcomes, and not just the certainty of any specific outcome, because we are in volatile times,” he said.

This article is part of the Advisor To Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.