A Cautionary Window to Hedge Global Portfolios: Why I’ve Turned Bearish in 2026
By Roger V. Coleman- January 7th 2026 CEO, Coleman Group Partners (Barron’s Hall of Fame inductee)
For the first time in my 38 years managing assets, I’m turning bearish.
Not because I think the world is ending. Not because I believe markets must crash. But because the risk/reward math has changed and investors are being paid less and less for taking more and more risk.
As I write this (January 2026), global markets are pricing a “soft landing plus easing” narrative. Yet the headlines, policy backdrop, and market structure are flashing something else: a fragile calm that can break quickly.
This is a cautionary time. If your portfolio is meaningfully invested across global stocks and bonds, I believe the hedge window is open right now and into Q1 2026.
Why now: the setup looks deceptively comfortable
A few realities are colliding:
1) Markets are strong, but confidence is crowded
After multiple years of solid U.S. equity gains, optimism is no longer contrarian. One wealth manager noted the S&P 500 delivered a 17.9% gain in 2025, marking three consecutive years of double-digit returns. Mariner
That kind of streak doesn’t “cause” a downturn, but it often reduces forward returns and raises the penalty for surprises.
2) The bond market is not the shock absorber it used to be
Investors still talk about bonds as if they automatically diversify equity risk. But the core issue today is fiscal gravity: heavy issuance, high debt loads, and term premium that can rise at the wrong time.
Reuters’ 2026 outlook reporting shows analysts expect yields to remain elevated and even edge higher into year-end 2026. Reuters+1
That matters because when yields are sticky, both equity multiples and bond prices can be pressured simultaneously.
3) Central banks are signaling “the easy part is over”
In late 2025, Reuters reported major central banks were signaling the rate-cut cycle is ending (or nearing an endpoint), with policymakers still wary about inflation and credibility. Reuters
When markets are positioned for supportive policy and central banks become less predictable, volatility tends to return.
4) Growth is slowing, and the world is fragmenting
The IMF’s October 2025 World Economic Outlook projects global growth slowing to 3.1% in 2026 (down from 3.3% in 2024). IMF
Slower growth isn’t automatically bearish, but it is a problem when valuations are high, margins are optimistic, and geopolitics can change the rules overnight.
5) Geopolitics is back in the driver’s seat
Early January has already delivered market-moving developments: geopolitical upheaval tied to Venezuela and oil flows, plus rising tensions in Asia, showing up immediately in cross-asset moves (oil, gold, yen, equities). Reuters+2Reuters+2
Separate from Venezuela, the Financial Times reported the U.S. seizure of a Russian tanker in the Atlantic, another reminder that sanctions enforcement and maritime risk can escalate fast. Financial Times
6) International cracks are visible, even if indexes look fine
Europe ended 2025 in a “benign” spot with inflation easing toward target, but Reuters notes risks still linger (trade friction, weak exports, structural constraints). Reuters
In the UK, the Guardian reports the construction sector is in its longest downturn since the financial crisis era, with housebuilding especially weak. The Guardian
And in China, Reuters has reported both softer services momentum and policy efforts around bank bad loans, consistent with ongoing stress in parts of the system. Reuters+1
The “cautionary time” to hedge: now through Q1 2026
Here’s why I’m calling out this specific window:
• Complacency is high (markets near highs; volatility often subdued).
• Policy uncertainty is rising (diverging central bank paths; fiscal questions; political risk). Reuters+1
• Geopolitical headlines are already moving prices (oil, currencies, risk assets). Reuters+1
Hedges are cheapest and easiest to implement when you don’t feel like you need them. By the time fear arrives, costs rise and execution gets sloppy.
What “hedging” should mean in 2026 (practical, not theoretical)
I’m not talking about going to 100% cash or making heroic all-or-nothing calls. I mean building a portfolio that can absorb a shock without forcing you to sell quality assets at the worst time.
Here are the most practical levers sophisticated investors use:
1) Reduce “silent concentration”
Many “diversified” portfolios are concentrated in a handful of drivers:
• one equity factor (growth/AI optimism),
• one currency,
• one duration profile.
Action: rebalance, cap single-theme exposure, and stress test for “one bad week” scenarios.
2) Rebuild true ballast in fixed income
If yields stay elevated, you want to be deliberate about:
• duration (how sensitive you are to rising yields),
• credit risk (spreads can widen fast when growth slows),
• liquidity (some “safe” holdings don’t trade well in stress).
Action: match bond exposure to what you need it to do: income, stability, or crisis protection (those are not the same thing).
3) Add explicit equity downside protection
If your portfolio can’t tolerate a 15–25% equity drawdown without forced selling, it’s worth considering:
• index put spreads,
• collars (sell a call to help finance protection),
• systematic risk overlays (rules-based de-risking).
Action: define the goal first (“limit drawdown to X” or “protect the next 6–12 months”), then choose the tool. Protection without a purpose becomes expensive clutter.
4) Consider diversifiers that behave differently in stress
In geopolitical or inflation-linked shocks, you often see different “winners” than in a standard recession playbook.
Action: don’t assume yesterday’s correlations will hold. Build redundancy into the plan.
My bottom line
I’m bearish because I see a market priced for smooth outcomes in a world that keeps delivering lumpy ones.
When:
• growth is slowing, IMF
• bond yields may stay elevated due to debt and supply dynamics, Reuters+1
• central banks are less uniformly supportive, Reuters
• and geopolitics is actively moving assets, Reuters+1
…then protecting portfolios is no longer pessimism. It’s professionalism.
This is the cautionary time to hedge: January through Q1 2026. Not because a crash is guaranteed, but because the asymmetry is real: the upside from “everything goes right” is smaller than the downside from “something breaks.”
Important disclosure: This commentary is for informational purposes only and does not constitute investment, legal, or tax advice. Hedging involves costs and may reduce returns. Any strategy should be evaluated in light of objectives, time horizon, liquidity needs, and risk tolerance.