“Busy old fool, unruly sun, Why dost thou thus, Through windows, and through curtains call on us?" In the opening of John Donne’s The Sun Rising, the speaker rebukes the morning sun for intruding on two lovers, setting private desire against the demands of time and routine.

And so it follows that investors find markets in the summer months just as testing. It might be because of recent geopolitical developments, including those in Iran, or an unexpected rise in interest-rate expectations. Whatever the catalyst, the consequences are familiar: volatility rises, markets wobble, and commentators rush to explain what has happened.

However, such volatility and market turbulence do not inherently create weaknesses in portfolios. More often, they expose weaknesses that were already there. These preexisting conditions are then brought into sharp relief when assumptions, concentrations and behaviours are tested.

It’s something that family offices and sophisticated investors should bear in mind when allocating capital: not whether volatility will arrive (it almost always does) but whether a portfolio has been constructed to withstand it.

One of the most persistent misconceptions in investing is that volatility and risk are interchangeable.

Markets rise and fall as part of their natural function, but real risk is something different. It is about being forced to sell assets at the wrong moment, or discovering that a portfolio is more concentrated than expected. Perhaps most saliently, it is the need for liquidity precisely when liquidity is hardest to find.

The International Monetary Fund (IMF) has repeatedly warned that liquidity mismatches can amplify financial stress when markets become dislocated, and volatility only amplifies these vulnerabilities. This distinction has become increasingly important over the past decade. Investors have operated in an environment where abundant liquidity, supportive central banks and a handful of powerful investment themes have often rewarded broad participation. In many cases, simply remaining invested has been enough to generate attractive returns, but this can also create a false sense of resilience.

Portfolios constructed during favourable periods often appear robust until conditions change. When markets become unsettled, assumptions that previously went untested suddenly come under scrutiny.

One of the most significant risks exposed by recent bouts of volatility has been concentration. Markets may appear highly diversified and dispersed on the surface, but large-cap stocks and buoyant recent performance have been driven by a relatively small number of companies and themes.

The Magnificent Seven has, at various points, accounted for more than 30% of the S&P 500's total market capitalisation, creating one of the most concentrated US equity markets in decades, according to J.P. Morgan.

Artificial intelligence is just one of the most obvious examples. The companies building the infrastructure and models underpinning the AI economy have generated extraordinary returns and attracted enormous quantities of capital. Their success has lifted indices, driven sentiment and created an impression of widespread market strength.

Look beneath the surface, however, and the picture becomes more nuanced, as many other sectors, companies and investment styles have not experienced the same momentum. The result is a market environment where headline performance can disguise a widening gap between winners and losers.

CHRIS DARBYSHIRE: "Rising indices and falling index volatility have concealed a maelstrom of activity beneath the surface. The liquidity of public markets lends an immediacy to thoughts and actions, meaning that public markets have an extraordinary ability to shape-shift into – and out of – the latest fashionable theme. Earlier in the year, vast swathes of the software sector were impacted within a few days by the fear of AI. Recent price bubbles in Bitcoin and gold have burst. The Aerospace & Defence theme has imploded, with most stocks in the sector having fallen since the Iran War began. Even the so-called Magnificent Seven tech stocks have fallen out of fashion; as a whole, the group is back to its levels of 9 months ago.

In their place, investors moved into semiconductor stocks. These have been the beneficiaries of the AI boom, despite being much further down the value chain. Such is the demand for all things related to AI that the chip sector has been able to increase the price of relatively low-value-added components several-fold, seemingly defying the laws of economics. The fact that indices are still hitting all-time highs shows that increasing valuations in the semiconductor sector have been enough to offset valuation declines elsewhere.

And, of course, there is SpaceX, a unique collection of assets that is a law unto itself. SpaceX shares began trading on 12 June, generating around $83bn in trading volume on its first day in public markets. SpaceX’s closest listed peer, Rocket Lab, fell 10.8% in a single day on 12 June, while AST SpaceMobile, which designs satellite-based mobile networks, plunged 15.5% on the same day. In the two weeks following SpaceX’s IPO, those two companies underperformed SpaceX’s stock by more than 35%. But the nature of the competitive threat from SpaceX was a known quantity and did not change either on the day of its IPO or over the following two weeks. This illustrates the whack-a-mole nature of public markets, as capital moves rapidly from one theme to another. Retail investors in the US bought $370m worth of SpaceX stock directly during the first three trading sessions.

According to the father of value investing, Benjamin Graham, “In the short run, the market is a voting machine but, in the long run, it is a weighing machine.” For investors, the lesson is straightforward. It is not enough to understand what is performing today. The more important challenge is understanding how dependent returns have become on a relatively small number of drivers, and whether they will persist."

Volatility has a habit of highlighting the value of liquidity. In more stable conditions, liquidity is often taken for granted. Assets can be bought and sold more easily and efficiently, and capital can be moved between opportunities and markets that appear to be functioning smoothly, but stress can change these conditions very rapidly.

Liquidity is valuable at these points because it provides optionality, allowing investors to rebalance their portfolios, take advantage of dislocations and meet obligations without becoming forced sellers. This optionality is particularly relevant for family offices, whose objectives often extend far beyond quarterly performance reports.

A portfolio should not be designed solely for favourable conditions, but should instead be built with resilience in mind for those times when markets become less predictable. That requires a clear understanding of liquidity requirements, investment horizons and the role each asset plays within the broader strategy.

PHILIP HARRIS: "In essence, a portfolio is both a collection of investment assets and an expression of an investor’s financial circumstances, objectives and aspirations. When properly constructed, a portfolio grows over time to remain aligned with an investor’s changing circumstances, playing an important role as a psychological support as well as a financial buttress for an investor’s wider economic interests. Setting a reasonable time horizon is crucial, because it creates flexibility for investments that require longer time periods to produce effective and substantial growth. Among those investments requiring longer time horizons, less-liquid private markets have become a key strategy for investors seeking growth over the past decade.

Holding liquid investments in other parts of the portfolio can balance the need for less-liquid holdings as well as create growth opportunities in their own right. Over the past few years, in particular, the AI boom has shown that public markets can create opportunities for growth while also providing ample liquidity. We see liquid, public markets as a complement to private market holdings, creating valuable optionality. As well as providing alternative avenues for growth, this can also mean holding lower-growth, but liquid, investments that can stabilise portfolios, ensuring a high degree of flexibility during periods of stress. These assets can then be deployed into growth opportunities selectively over time.

Portfolio design is key to balancing growth and flexibility. The objective is not to eliminate volatility, but to ensure that it does not force ill-timed investment decisions."

Perhaps the most important feature of market turbulence is what it reveals about investor behaviour. The most consequential investment mistakes often occur when uncertainty rises and emotions begin to influence decision-making.

Investors may chase momentum, react rashly to headlines and eschew carefully constructed plans in favour of short-term responses to immediate events. All of this is quite understandable as humans are hardwired to respond to immediate threats. Markets, however, are wired differently and tend to reward patience more than reaction.

According to the Julius Baer 2025 Family Barometer, geopolitical uncertainty remains one of the most significant concerns for investors, and this is influencing capital-allocation decisions among family offices around the world. Yet those who navigate volatile periods most successfully are not necessarily those who predict every market movement. In fact, more often than not, they are the ones who maintain a coherent approach while others become distracted by noise.

It follows, then, that discipline remains one of the most underrated investment advantages, which allows investors to distinguish between temporary disruption and genuine structural change. It prevents short-term events from derailing long-term objectives. Most importantly, it creates consistency at precisely the moments when it is hardest to maintain.

Successful investing is not merely about identifying attractive opportunities – diversification and risk management remain important, too. These fundamentals might not be particularly fashionable, but they endure precisely because they work.

BlackRock's Investment Institute continues to emphasise resilience, diversification and portfolio adaptability as essential characteristics in a world increasingly shaped by geopolitical fragmentation, changing monetary conditions and market concentration. For family offices and sophisticated investors, the objective should also be to construct portfolios around clearly defined outcomes rather than follow prevailing market narratives. Capital should be allocated with a clear understanding of risk tolerance, liquidity needs and investment horizons. Public and private markets should complement one another, and opportunities should be assessed not only for their return potential, but also for the role they play within the investor’s broader portfolio.

The aim is not to predict every shock, but to focus on the creation of a framework capable of absorbing them.

Summer volatility will come and go, as it always does. News cycles will change, and catalysts will differ as fresh risks emerge and old fears return.

What remains constant throughout this is the value of preparation. Periods of market turbulence provide useful information because they reveal whether portfolios have been built around conviction or convenience, discipline or momentum, objectives or narratives.

The investors who emerge strongest from volatile periods are rarely those who forecast them perfectly – they are the ones who prepared for them in advance.

Volatility does not break portfolios by itself; the damage comes when investors let the heat of the moment go to their heads.