Opportunities in Volatility: Navigating Trade Tensions to Build Resilient Portfolios

The global market is trembling. Trade tensions, tariff uncertainties, and geopolitical chess moves have sent volatility soaring—measured by the CBOE Volatility Index (VIX), which spiked to a 14-month high in June 2025. For many investors, this is a time of anxiety. But for the disciplined, it's a golden opportunity to build portfolios that thrive in chaos. History shows that volatility creates buying opportunities in undervalued sectors, and today's environment is no exception. Let's dissect how to turn trade war turbulence into profit.

1. Volatility: A Double-Edged Sword with Hidden Gems

Volatility isn't inherently bad—it's a signal of opportunity. Consider the 2018 trade war: sectors like semiconductors and logistics saw sharp declines but rebounded strongly within 12–18 months. Today's tariffs on steel, aluminum, and automobiles are creating similar dislocations. The key is to identify sectors where fundamentals remain intact but prices have been unjustly punished.

The Transport & Logistics Sector: A Value Play

Tariffs have hammered sectors like trucking and ocean freight, with U.S. port activity fluctuating wildly. Yet, this chaos masks a strategic opportunity.

Why Buy Now?
- Railroads: Companies like Union Pacific (UNP) and CSX (CSX) are benefiting from reshoring trends. As manufacturers shift production to the U.S. to avoid tariffs, rail freight demand is rising.
- 3PL Firms: XPO Logistics (XPO) leverages Foreign Trade Zones (FTZs) to defer tariffs, offering a cost-efficient edge.

Investment Play: Buy UNP and XPO at current discounts. Both have strong cash flows and exposure to domestic demand, insulated from trade war headwinds.

2. Digital Infrastructure: Thriving in the Storm

While traditional industries reel, digital infrastructure is a bright spot. Data center investments surged 300% in Q1 2025, driven by AI and hyperscalers' capex.

Why It's a Safe Haven:
- Resilience: Digital infrastructure is less sensitive to trade tariffs and more tied to secular growth in cloud computing and cybersecurity.
- Yield: REITs like Equinix (EQIX) offer dividend yields of 2.5%, higher than the S&P 500 average.

Investment Play: Allocate to digital infrastructure ETFs (e.g., VanEck Vectors Cloud Computing ETF (CBD)) or directly to firms like Equinix. This sector offers both growth and stability.

3. Energy & Renewables: Navigating Policy Crosscurrents

The energy sector faces headwinds—tariffs on Chinese batteries and IRA incentive delays—but opportunities exist in domestic projects.

Key Plays:
- Battery Manufacturing: The U.S. aims to meet 30-40% of energy storage demand by 2030. Invest in firms like Lithium Americas (LAC), which is expanding U.S. lithium production.
- Natural Gas: A cheaper alternative to imported oil, benefiting from reduced demand for foreign energy.

Investment Play: Use dips in energy ETFs (e.g., XLE) to position for a rebound once policy clarity emerges.

4. Private Markets: A Hedge Against Public Volatility

Private markets—infrastructure, real estate, and venture capital—are outperforming public equities. In Q1 2025, private infrastructure funds delivered 8-11% returns, versus 660 basis points of underperformance by listed equities.

Why Diversify?
- Lower Correlation: Private assets don't react instantly to tariff news, offering a buffer against market swings.
- Liquidity Solutions: Evergreen funds, now favored by 44% of advisors, provide flexibility without locking up capital.

Investment Play: Allocate 5-10% of portfolios to private infrastructure or real estate funds. Look for managers focused on greenfield projects, like data centers or renewable energy.

5. The Playbook: Discipline Over Emotion

• Rebalance Regularly: Use volatility to sell overvalued sectors (e.g., overhyped AI stocks) and buy undervalued ones.
• Stay Long-Term: Trade wars are cyclical. Hold positions for 12–18 months to ride out short-term noise.
• Avoid the “Wait-and-See” Trap: Waiting for clarity means missing the bottom. Act when dislocation peaks, not when headlines calm.

Risks and Considerations

• Geopolitical Whiplash: The 90-day tariff truce with China could extend, but prolonged uncertainty demands diversified holdings.
• Sector-Specific Headwinds: Agriculture and construction face structural challenges—avoid overexposure.

Conclusion: Volatility Is Your Friend

The current trade war-induced volatility is a gift for investors willing to look beyond the noise. Sectors like railroads, digital infrastructure, and domestic energy offer compelling valuations, while private markets provide a shield against public market swings. By rebalancing disciplinedly and diversifying into resilient assets, portfolios can not only withstand turmoil but also capitalize on it. The playbook is clear: Buy the dip, think long-term, and don't let fear drive your decisions. The next volatility spike could be your best entry point yet.

Stay resilient, stay invested.