Asset classes are constantly rotating in and out of leadership. For example, in the past month, the consumer discretionary and…
Asset classes are constantly rotating in and out of leadership. For example, in the past month, the consumer discretionary and tech sectors have been smacked down, while proven defensives such as consumer staples and health care have seen slight decreases.
Meanwhile, alternative investments, such as structured finance products and private credit, have been getting more attention.
Here’s a look at how some popular asset classes are performing and what might be ahead:
— Cryptocurrencies.
— Structured finance products.
— Real estate investment trusts (REITs).
— Financial stocks.
— Consumer staples stocks.
— Private credit.
— Resilience-focused investments.
— Dividend-paying stocks.
— International stocks.
— Treasury bonds.
Cryptocurrencies
Prices for Bitcoin (BTC) and Ethereum (ETH), the two largest cryptocurrency assets, took a tumble in February.
However, Steven McClurg, CEO of Canary Capital in Nashville, Tennessee, says several key assets beyond those two are emerging as strong performers.
For example, he says, Litecoin (LTC) has been a standout. He cites its security and expanding adoption as a factor behind its resilience, as investors are looking for reliable digital assets.
“With these factors in play, I anticipate LTC could reach $250 this year, especially as broader market confidence strengthens and liquidity flows back into established cryptocurrencies,” McClurg says.
LTC surged in late 2024, but like many crypto coins, it’s been volatile so far this year, and it’s down 11.3% as of March 12.
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Structured Finance Products
It’s not a common sector or even a well-known asset class, but structured finance has been showing significant growth. There’s a reason you may not hear about structured finance very much: It involves creating complex financial products that bundle loans, mortgages or other assets into securities investors can buy.
These products, like mortgage-backed securities and collateralized loan obligations, help spread risk by pooling assets. However, they can be complex and aren’t suitable for all investors.
“The opportunity to fix your risk in this volatile environment is a highly sought-after commodity at this point in time,” says Jason DeLorenzo, principal and owner of Ad Deum Funds and the Volland trading platform in Chantilly, Virginia.
He advises using caution with leveraged instruments in this category.
Real Estate Investment Trusts (REITs)
The S&P real estate sector has posted a gain of 1.6% in 2025, as of March 12.
Strong demand from various industries has been pushing real estate investment trusts higher, as has the potential for increases in rental income due to inflation.
REITs enjoy a favorable tax structure that requires them to distribute at least 90% of taxable income to shareholders.
“REITs and REIT ETFs can be a great way to gain exposure to one of the most profitable sectors in the economy without the hassle of owning your own property’s management, combining an income with liquidity,” says Dennis Shirshikov, an adjunct professor of economics at the City University of New York.
A diversified REIT ETF, he adds, could give exposure across sectors such as health care and industrials.
Financial Stocks
Financials are generally considered cyclical stocks, as they tend to perform better during strong economic cycles and tend to decline in recessions.
They’re often aligned with growth stocks in an expanding economy but are not considered defensive, as they can be significantly affected by interest rates and economic downturns.
So far in 2025, the S&P 500 financial sector is down 1.6%.
“Financial stocks in the near term might benefit from a bullish move in bonds if recession fears persist, but debt loads will affect liquidity and therefore might cause a situation where they become insolvent,” DeLorenzo says.
Consumer Staples Stocks
This sector has long been a tried-and-true defensive investment. People don’t stop buying soap and toothpaste because the economy is weak or the stock market is down.
Year to date, the Consumer Staples Select Sector SPDR Fund (ticker: XLP) has returned 1.4%, putting it in the ranks of other defensive gainers, such as real estate and utilities.
In addition to generally holding up in a recession, consumer staples are known for paying reliable dividends. That helps offset price declines in a market downturn.
The XLP ETF has a distribution yield of 2.7%, and sector heavyweights Procter & Gamble Co. (PG), Costco Wholesale Corp. (COST) and Walmart Inc. (WMT) all have long histories of yearly dividend increases.
[SEE: 7 Stocks That Outperform in a Recession]
Private Credit
Private credit refers to non-bank loans for businesses or individuals. These can offer higher yields than traditional bonds. It’s a lightly regulated asset class, and is generally most suitable for institutional investors or wealthy individuals.
“A high-net-worth investor might consider investing in private credit because it offers a compelling blend of attractive returns, portfolio diversification and reduced volatility compared to traditional public market investments,” says Chris Rawley, CEO of Harvest Returns in Fort Worth, Texas.
Rawley explains that private credit funds typically provide loans to middle-market companies or finance specialized projects.
“This asset class can serve as a hedge against market fluctuations, as it is less correlated with equities and traditional fixed-income securities, offering stability during economic downturns,” Rawley adds.
He notes that private credit as an investment vehicle, managed by experienced professionals, can offer opportunities not readily available in public markets. It can also align with a strategy to maximize risk-adjusted returns.
Resilience-Focused Investments
The term environmental, social and governance (ESG), a strategy focusing on corporate responsibility, is in the process of being sidelined, but big investors are still concerned about the sustainability of profits. That may apply to companies with renewable infrastructures, which can be a plus for the bottom line.
“Now referred to in many circles as resilience investments, the trend narrows traditional ESG to the role of a company’s adaptability in an era of environmental and social change over the long haul,” says Shirshikov.
Resilient investing focuses on building portfolios that can withstand economic downturns, market volatility and long-term geopolitical challenges. It integrates factors such as financial stability, sector durability, and environmental or technological shifts.
The goal is to achieve consistent returns while minimizing losses in a shaky economy. For example, resilient stocks may include Coca-Cola Co. (KO) and Johnson & Johnson (JNJ) for stability, Amgen Inc. (AMGN) in health care, Duke Energy Corp. (DUK) in utilities, and CBOE Global Markets Inc. (CBOE) for defensive market performance.
Dividend-Paying Stocks
Dividend stocks often outperform in market downturns because they provide consistent income, attract risk-averse investors, and often hail from stable, recession-resistant industries like utilities and consumer staples. Their steady cash flow helps cushion losses during volatile market conditions.
These stocks often don’t boast the sky-high valuations of growth names in a bull market, but they are frequently less volatile in a bear market. For example, the Vanguard Dividend Appreciation ETF (VIG), which tracks an index of companies that have increased their dividends over time, is outperforming the Vanguard S&P 500 ETF (VOO) so far in 2025.
“Shareholders are still interested in dividend-paying stocks that provide income as well as potential for capital appreciation in low-interest-rate environments,” says Shirshikov.
“Beyond the familiar blue chips, I’m seeing emerging-markets players with robust dividend policies that add a different challenge to the classic income strategies,” he adds.
International Stocks
U.S. stocks have had a rough go of it in 2025. While tech-heavy U.S. indexes are slumping, international stocks, which have long lagged domestic indexes, are having a moment.
The Vanguard Total International Stock ETF (VXUS), composed of an index of stocks in developed and emerging markets, has been handily outperforming large-cap U.S. stocks.
Uncertainty about U.S. policy on tariffs is a factor behind the decline in domestic stocks. In addition, economic and earnings estimates are rising in Europe.
In a March 10 report, Jeffrey Kleintop, managing director and chief global investment strategist at Charles Schwab, wrote, “The longer the tariff turmoil and related uncertainty about trade policy lasts, the more likely economic and earnings growth may take a hit.”
He added that economic surprise indexes are showing U.S. data missing expectations, while European economic data is exceeding forecasts.
Treasury Bonds
Yields on 10-year Treasury bonds have fallen since the beginning of the year.
Investors often consider Treasurys while yields are falling and equity markets are down because they offer stability, capital preservation and guaranteed income. As stocks decline, bond prices typically rise, offering a safe haven and reducing portfolio risk.
“Treasuries can be safe havens that appreciate at times of fear and benefit from lower interest rates when the economy weakens,” says David Russell, global head of market strategy at TradeStation Group.
Russell points out that yields are still within a long-term range, despite the year-to-date decline. He adds that inflation is likely the main catalyst for Treasurys because the job market hasn’t shown significant strain yet.
“The Fed may need to see more pain in terms of higher unemployment and lower payrolls before embracing its other mandate,” Russell adds.
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Update 03/13/25: This story was previously published at an earlier date and has been updated with new information.