Managing Alternative Assets in Today's Market Environment
Tuesday, July 15, 2025 at 1:24PM
Telos Wealth Management

Sean Gross, CFP®, AIF®
Co-Founder & CEO

July 15, 2025

Investors constantly face the challenge of maintaining long-term focus while navigating short-term market volatility. This challenge becomes particularly pronounced during periods of market rallies, when various asset classes capture headlines and create momentum that can tempt investors to abandon their strategic approach. Recent surges in digital currencies, industrial metals, and precious metals exemplify how market enthusiasm can create pressure to react impulsively.

Historical market cycles have consistently demonstrated that sustainable investment success requires discipline and diversification rather than speculation. Traditional asset classes like stocks and bonds remain portfolio cornerstones because they provide the risk-return characteristics necessary to achieve long-term financial objectives. Market euphoria, whether focused on technology stocks or digital assets, can reverse rapidly and unexpectedly.

The foundation of effective investing involves flexible portfolio construction that leverages diverse asset characteristics while maintaining alignment with long-term objectives. Success is measured not by whether a portfolio contains this week's trending investment, but by its ability to support retirement security, family financial needs, homeownership goals, or philanthropic aspirations.

Recent record highs in Bitcoin, copper price surges, and rallying precious metals present investors with complex allocation decisions. These movements reflect both broad market optimism and specific policy developments from Washington, along with increased institutional participation. The challenge lies in evaluating these assets through a portfolio lens rather than as isolated investment opportunities.

Digital currencies exhibit significant volatility characteristics

Bitcoin's recent surge coincides with Congressional consideration of multiple cryptocurrency regulations during what observers call "Crypto Week." The House of Representatives is examining the GENIUS Act for stablecoin regulation, the CLARITY Act for comprehensive digital currency frameworks, and the Anti-CBDC Surveillance State Act to prevent Federal Reserve digital currency creation.

Digital currencies attract attention through extreme price movements, institutional adoption, new investment vehicles like ETFs, and monetary policy concerns. These factors involve complex and speculative elements. For long-term investors, the critical question centers on whether cryptocurrencies can serve meaningful portfolio functions.

Bitcoin's portfolio appropriateness depends on individual goals and risk capacity. The reality involves price volatility multiple times greater than equity markets. The 2022 bear market illustrated this dynamic, with Bitcoin declining over 75% compared to approximately 25% for the S&P 500. This demonstrates how digital currencies can magnify portfolio risk during market stress periods. While Bitcoin subsequently rebounded more strongly, the chart illustrates similar performance patterns to the S&P 500 since 2018, despite different trajectories.

Important distinctions exist among cryptocurrencies regarding price behavior. Ethereum, another prominent digital currency, shows negative performance this year and has declined roughly 25% from December highs. Numerous other cryptocurrencies and "meme coins" have followed divergent paths. Careful portfolio context evaluation remains essential rather than reacting to media coverage.

Industrial metal performance reflects economic and policy dynamics

Copper's surge to record levels followed White House announcements of 50% import tariffs on this essential industrial metal.

As a critical component in construction, electrical infrastructure, electronics, and renewable energy development, copper serves vital economic functions. Market participants often reference copper as "Dr. Copper" due to its price movements potentially indicating broader economic trends.

Currently, the United States imports 45% of its copper consumption, primarily from Chile, Canada, Mexico, and Peru. Tariff policies may encourage domestic production over time while affecting short-term pricing and supply chain dynamics. China's significant copper consumption also creates sensitivity to global economic conditions and trade relationships.

For investors, distinguishing between dramatic price movements and portfolio fit remains crucial. Attempting to predict copper's next direction resembles forecasting precise economic and trade policy outcomes. Instead, focus should center on whether copper and similar assets enhance portfolio characteristics alongside other economically-sensitive holdings like equities.

Precious metals present unique portfolio considerations

Gold and silver have recently benefited from their traditional roles as potential hedges against currency volatility, inflation concerns, geopolitical tensions, and central bank purchasing activity. Theoretically, these metals can provide value storage during economic uncertainty, though they face limitations including the absence of income generation.

The accompanying chart demonstrates gold's performance during events like the global financial crisis. However, over extended periods, equity markets have surpassed gold performance despite recent rallies. During the 2010s, many anticipated continued gold appreciation amid low Federal Reserve interest rates. The failure of this expectation illustrates the difficulty and counterintuitive nature of predicting precious metal directions.

For long-term investors, portfolio alignment with financial objectives remains paramount. Assets including Bitcoin, copper, gold, and silver highlight both potential advantages and the necessity of thoughtful allocation decisions. These assets should enhance rather than substitute for diversified holdings in stocks, bonds, and other foundational asset classes.

The bottom line? While various assets gain attention through recent rallies, investors should resist chasing short-term performance. Understanding each asset's distinctive characteristics provides the optimal approach for aligning portfolios with long-term financial objectives.

Telos Wealth Management, LLC, is a registered investment adviser in the state of Washington. The Adviser may not transact business in states where it is not appropriately registered or exempt from registration. Individualized responses to persons that involve either the effecting of transactions in securities or the rendering of personalized investment advice for compensation will not be made without registration or exemption.

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