Old-School Wall Street Strategies Deliver Strong Returns Away From the AI Spotlight
Amid relentless excitement around artificial intelligence, crypto volatility and thematic trades, a quieter but meaningful shift unfolded across global markets in 2025. Traditional, diversified investment strategies—often dismissed as dull or outdated—posted some of their strongest returns in years, even as investor attention remained firmly fixed on Big Tech and AI-linked opportunities.
Simple portfolios split between stocks and bonds delivered double-digit gains, marking their best year since 2019. Multi-asset strategies blending equities, bonds and commodities outperformed headline indices such as the S&P 500. Yet, despite this performance, the resurgence of old-school Wall Street prudence has largely gone unnoticed.
“It’s ironic,” said Marko Papic, chief strategist at BCA Research.
“Despite all the focus on the AI story, 2025 was not a stocks story. It was all about global diversification.”
Balanced Portfolios Prove Their Value in a Volatile Year
The strength of diversified strategies became evident during periods of market stress. A softer-than-expected US inflation report this week triggered a rare rally across both stocks and bonds—exactly the environment where balanced portfolios thrive.
Risk-parity funds, which allocate capital based on risk rather than asset class, posted gains for the week. These strategies benefited from falling bond yields alongside equity strength, reinforcing the argument that diversification still matters even in an AI-dominated market narrative.
A standout example was a Cambria Investments ETF holding 29 exchange-traded funds across global markets, which delivered its best annual performance on record. Strong gains in overseas equities and commodities played a crucial role, highlighting the benefits of looking beyond US mega-cap stocks.
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Capital Continues to Chase Concentration Despite Broader Gains
Yet, while diversified portfolios quietly performed, capital continued flowing in the opposite direction. Investor money gravitated toward concentrated exposure in Big Tech, narrow thematic trades—from nuclear energy to quantum computing—and blunt hedges such as gold.
This trend has raised concerns among strategists, particularly as valuations stretch and market concentration deepens in tech-heavy US benchmarks. Some warn that abandoning diversification at this stage could expose portfolios to sharper drawdowns if market leadership shifts.
“The danger is not what you own,” a strategist noted, “but what you don’t own when leadership changes.”
Retail Investors Still Turning Away From Balanced Strategies
Retail investors, in particular, have been steadily moving away from balanced and multi-asset funds. According to JPMorgan Chase & Co., traditional blended strategies—such as the classic 60/40 portfolio—have seen outflows for 13 consecutive quarters, before a modest rebound in recent months.
Key trends shaping retail behaviour include:
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Persistent inflows into pure equity and bond funds
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Continued neglect of balanced and risk-parity strategies
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Lingering distrust of bonds after recent volatility
Nikolaos Panigirtzoglou, a JPMorgan strategist, attributes this to years of underwhelming performance compounded by unusual correlations across asset classes.
Bond Rout of 2022 Still Shapes Investor Psychology
A major turning point was the 2022 bond market rout, when aggressive central bank tightening led to steep losses in fixed income. Bonds, long viewed as a stabilising force, failed to protect portfolios during that period.
“That just destroyed the psyche of retail investors about the bond market,” said Jim Bianco of Bianco Research.
“That’s why investors keep jumping from asset to asset.”
This loss of confidence has lingered, even as bonds have regained their defensive qualities in more recent market moves.
Market Shocks Highlight the Case for Balance
April provided another reminder of diversification’s importance. When US President Donald Trump announced new trade tariffs during a televised “Liberation Day” address, markets reacted sharply.
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The S&P 500 fell 9% in a single week
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A benchmark 60/40 portfolio dropped over 5%
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Treasury bonds rallied
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Gold declined
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Bitcoin plunged before rebounding
While the headline moves grabbed attention, the episode underscored how different assets respond differently to shocks—precisely the logic behind diversified portfolios.
Signs of a Broader Market Shift Beneath the Surface
Despite the focus on AI, market leadership has been quietly broadening. Value-oriented equity ETFs, many of which deliberately avoid mega-cap technology stocks, attracted more than $56 billion in inflows this year—the second-highest annual total since at least 2000.
Other notable trends include:
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Cambria’s Global Value ETF rising nearly 50%, its best year since launch
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A rebound in international equities, aided by fiscal reforms and a weaker dollar
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Small-cap stocks outperforming in the fourth quarter
These developments suggest investors may already be positioning for a more diversified market environment.
Strategists See Diversification Extending Into 2026
Several market strategists believe this shift has room to run. Greg Calnon, global co-head of public investing at Goldman Sachs Asset Management, expects earnings growth to broaden in 2026, with small-cap and international stocks outperforming.
He also sees continued strength in municipal bonds, supported by attractive tax-adjusted yields and strong demand.
Meanwhile, David Lebovitz of JPMorgan Asset Management is selectively allocating to emerging-market debt and UK gilts, while maintaining targeted exposure to US equities and AI-linked themes.
The Quiet Comeback of Balance
While AI may dominate headlines and investor conversations, 2025 has shown that balance and diversification remain powerful tools. Old-school Wall Street strategies may lack the excitement of thematic trades, but their quiet resilience is proving difficult to ignore.
As markets head into 2026 with stretched valuations and concentrated leadership, investors may find that the most overlooked strategies of the year could also be the most enduring.
