Strategic Portfolio Resilience in a Post-Tariff Environment: Lessons from Q2 2025 Market Turbulence

The second quarter of 2025 was a rollercoaster for global markets, driven by the U.S. government's abrupt tariff announcements and the resulting inflationary pressures. The S&P 500 plummeted 11% in early April, while Treasury yields surged—a rare inversion of typical flight-to-safety behavior. Yet, amid the chaos, certain strategies thrived by leveraging tactical positioning in gold, oil, and global diversification. Let's dissect how the Lazard Global Equity Franchise and Granite Portfolios navigated this volatility and what lessons they offer for building resilient portfolios in uncertain policy climates.

The Tariff Shock and Market Reactions

The U.S. tariff announcements in April 2025—targeting China (50%), the EU (20%), and other trade partners—sent shockwaves through global markets. Investors initially fled to defensive assets like gold and oil, which saw short-term gains as fears of supply chain disruptions and inflationary spikes took hold. However, by May and June, the market's focus shifted back to momentum-driven growth stocks, leaving defensive plays in the dust.

The 10-year U.S. Treasury yield climbed to 4.5% by quarter-end, reflecting heightened concerns over fiscal sustainability and inflation. This environment tested the mettle of even the most seasoned investors, but those who adapted their portfolios to the shifting dynamics emerged stronger.

Lazard Global Equity Franchise: A Value-Driven Approach

The Lazard Global Equity Franchise strategy, which focuses on undervalued global equities, faced a mixed quarter. While it initially benefited from the flight to defensive assets in April, it underperformed the MSCI World Index in May and June as growth stocks rebounded. However, the fund's year-to-date outperformance by over 500 basis points (net of fees) highlights the power of its long-term value-investing philosophy.

Key to its resilience was its geographic and sectoral diversification. The fund's 18.62% allocation to the UK and 17.47% exposure to utilities—sectors often overlooked in momentum-driven markets—provided stability. While it avoided volatile sectors like oil and gas, its focus on high-quality, predictable earnings allowed it to weather the storm.

Critically, the fund's managers emphasized a disciplined approach to capital allocation, maintaining a concentrated portfolio of 25 companies. This strategy, while riskier in the short term, positioned the fund to capitalize on mispricings in undervalued markets. For investors, the takeaway is clear: diversification isn't just about spreading risk—it's about aligning with sectors and geographies that thrive when the crowd panics.

Granite Portfolios: Infrastructure as a Hedge

Granite Construction Incorporated (NYSE: GVA) took a different but equally effective approach. The company's Q2 2025 results showcased a strategic pivot toward infrastructure and civil construction, with acquisitions of Warren Paving and Papich Construction adding $150 million in revenue. These moves not only diversified Granite's geographic footprint but also insulated it from the volatility of commodity-linked sectors.

Granite's updated 2025 guidance—$4.35–4.55 billion in revenue, with adjusted EBITDA margins of 11.25–12.25%—reflects the strength of its capital allocation strategy. By focusing on domestic infrastructure projects and leveraging its expanded credit facility, Granite positioned itself as a “safe haven” in a market plagued by policy uncertainty.

Historical data on Granite's earnings release performance further underscores this resilience. From 2022 to the present, GVA has demonstrated a 50% win rate over 3 days, 70% over 10 days, and 60% over 30 days following earnings releases, with a maximum observed return of 2.37% over 10 days. While modest, these results suggest a consistent, positive trend that aligns with its role as a defensive play in volatile environments.

While Granite didn't directly invest in gold or oil, its emphasis on infrastructure—a sector often undervalued during growth booms—mirrored the defensive logic of commodity exposure. Infrastructure projects, with their long-term contracts and stable cash flows, act as a natural hedge against inflation and geopolitical risks.

Tactical Positioning: Gold, Oil, and Global Diversification

For investors seeking downside protection in a post-tariff environment, the lessons from Q2 2025 are instructive:
1. Gold and Oil as Short-Term Hedges: While these assets surged in April, their underperformance in May and June underscores the need for timing. A tactical, short-term allocation to gold and oil can cushion portfolios during policy-driven selloffs but should be paired with a clear exit strategy.
2. Global Diversification: The Lazard fund's UK and utility allocations, and Granite's domestic infrastructure focus, highlight the importance of geographic and sectoral balance. Avoiding overconcentration in U.S. tech or commodity-linked sectors can mitigate risks from policy shifts.
3. Quality Over Momentum: Both strategies prioritized high-quality, cash-generative assets over speculative growth plays. This approach proved resilient when markets pivoted away from momentum-driven narratives.

The Road Ahead: Staying Ahead of the Curve

As we move into the second half of 2025, the key will be adaptability. The Federal Reserve's cautious stance on rate cuts and the lingering threat of inflation mean volatility is likely to persist. Investors should consider:
- Rebalancing Portfolios: Increasing exposure to defensive sectors like utilities, infrastructure, and gold/oil during market dips.
- Monitoring Policy Developments: Legal challenges to tariffs and potential trade negotiations could reshape market dynamics. Staying informed is critical.
- Leveraging Diversified Managers: Funds like Lazard and Granite demonstrate the value of managers with a long-term, value-driven mindset.

In conclusion, Q2 2025's turbulence was a stress test for global portfolios. Those that embraced tactical positioning in gold, oil, and global diversification—while maintaining a focus on quality and long-term value—emerged not just unscathed, but stronger. As policy uncertainty looms, the message is clear: resilience isn't about avoiding risk—it's about managing it with foresight and discipline.

Final Takeaway: Build a portfolio that thrives in chaos. Diversify across geographies, sectors, and asset classes, and let value-driven strategies anchor your investments. In a world of tariffs and turbulence, adaptability is your greatest asset.