Investors await more clarity on trade policy. Don't hold your breath. My next guest, maintaining exposure to defensive sectors with low volatility characteristics. Joining me now, we've got Alessio De Longis who is the Invesco head of asset allocation and senior portfolio manager. Just walk us through how you're looking at portfolio construction and positioning right now.

Thank you for having me, Brett. Yes, one typical mistakes that investors do in times of uncertainty and heightened volatility is to divest and go to cash. While rule number one is really always stay invested. Over the medium and long term, staying invested is the biggest tailwind to anybody's wealth creation and portfolio return. Now, navigating that volatility though still requires making portfolio decisions. So, one typical mistake to avoid, as I mentioned, is going from equities to cash. Well, there is alternatives to that, to that approach to reducing portfolio risk. We like, for example, to shape that equity portfolio more into a balanced asset allocation, tilting more towards fixed income as yields rise and the economy is reaching the peak in the cycle. And risks of a recession or a downturn increase, fixed income looks more attractive. And as you mentioned, within that equity portfolio shifting towards a defensive positioning, towards more defensive sectors with low volatility characteristics and quality characteristics, ample profit margins, low leverage. So think about your defensive tech with low volatility. Think about healthcare, consumer staples. Those are sectors that allow you to remain invested in the equity market without being as vulnerable to the shocks to the economic cycle that are instead coming from exposures that are more cyclical, such as industrials, materials, energy, and so on and so forth.

And so as we've essentially made it through 98% of the S&P 500's earnings to this point, and as we had even rounded out last week, we still do have a couple household names that are going to make their way out. What what is kind of the checklist to really go down for investors to really prove how their portfolio can outlast some of the broader uncertainty that still lingers around the tariff policy?

Well, the the important check is are you as as volatility hits the market and your portfolio, are you comfortable with the type of drawdowns that you're seeing? It's important for any investor to always do a sanity check with their targeted risk tolerance and being able to navigate one month, three months, six months, or even one year drawdowns. How you react to that really tells you so much about the type of risk that you can take and whether you're going to be a contrarian or a momentum chaser. Diversifying the portfolio is always the most important check. I think a global balanced portfolio across equities, equity regions, fixed income, and alternatives and commodities is always the diversification is the only free lunch really as we like to say, available in in in markets. And it's important that we don't overconcentrate our bets at any given point in time.

And so with that in mind, we still do have a lot of the, not just uncertainty around tariffs, but still a little bit of, not fighting the Fed, but anticipating what the Fed is going to do going forward from here. How can portfolios best reflect what is anticipated of the Fed going into the back half of the year, knowing that they're not the primary kind of driving force for the markets right now?

I think it's important for for long-term investors or medium-term investors, any given Fed meeting is not going to be an appropriate reason to reposition or change a portfolio. It's about understanding where the Fed is on a broader cycle perspective. And to that end, the Fed is on a neutral holding path or cutting interest rates. So then the most important question is understanding why is the Fed cutting rates? Because inflation is no longer high that warrants higher rates or is because they're concerned about falling growth? The answer to that question leads to two very different portfolio outcomes. From our perspective, the Fed is here looking to ease rates because ultimately they are more concerned about faltering growth. So in that environment, learning from the Fed, understanding why the Fed is on the cyclical position that is in, should really drive portfolio decisions. Hence why we argue for a more balanced and somewhat more defensive portfolio both in the asset allocation and in the composition of the equity portfolio.

Alessio, great to have you here with us today. Thanks so much for taking the time.

Thank you for having me.