Investors face a rare convergence of risks heading into the second quarter of 2026: a military conflict disrupting energy markets, an aggressive tariff regime reshaping trade flows, a Federal Reserve caught between inflation and recession, and a stock market correction that has erased trillions in household wealth. The natural question is where to hide—and whether hiding is even the right strategy.

The Case for Cash and Short Duration

Money market funds have attracted more than $400 billion in net inflows since January, pushing total money market assets above $7 trillion. With yields still above 4 percent on most institutional money market funds, the opportunity cost of sitting in cash is modest by historical standards. Short-duration Treasury bills, yielding 4.1 to 4.3 percent, offer a similar risk-free return with slightly better tax treatment in some states.

The argument for elevated cash positions is straightforward: when the range of possible outcomes is unusually wide—from a quick resolution of the Iran conflict to a prolonged stagflationary environment—liquidity has option value. Cash gives you the ability to deploy capital when clarity emerges, rather than being forced to sell depreciated assets.

Commodities and Real Assets

Gold has been the standout performer of 2026, surpassing $2,400 per ounce as central banks and institutional investors seek inflation hedges. The metal has also benefited from de-dollarization trends, with several major economies accelerating efforts to diversify reserves away from U.S. Treasuries.

Energy exposure, while volatile, has provided a natural hedge against the geopolitical risk premium. Diversified commodity funds that include agricultural and industrial metals have outperformed the S&P 500 by more than 15 percentage points year-to-date.

The Contrarian Equity Case

For investors with longer time horizons and the stomach for volatility, the correction has created some of the most attractive equity valuations in over a year. High-quality dividend-paying stocks in sectors like healthcare, utilities, and consumer staples are trading at forward earnings multiples below their five-year averages. The key is selectivity—this is not a market that rewards broad index exposure, but one that favors companies with pricing power, strong balance sheets, and limited exposure to trade disruption.