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In light of the major market shocks of 2025, advisors are tasked more than ever with helping clients manage the psychological aspects of their money, while keeping an eye on market opportunities and headwinds that can impact their investment portfolios.
“In my role as a financial advisor and financial planner, behavioral finance coaching is one of the most important things I do,” said Cary Carbonaro, managing wealth advisor at Ashton Thomas Private Wealth.
“Every decision you make is pretty much driven by behavioral finance. Will you go out, stay in; how much will you spend? Behavioral finance on the coaching side is for us to teach [clients] not to be an enemy to [themselves]. Your brain will trick you,” she noted.
“Just think about April, when [the market] was down and the sky was falling,” Carbonaro said of the investor panic that ensued during President Trump’s tariffs announcement.
The S&P 500 plunged more than 12% in the week following the April 2 announcement.
“I felt like I didn’t have the information I could normally give,” to clients due to the unprecedented nature of the move. “But I still had to convince my clients to not sell everything and go to cash,” she explained.
“The smart money was buying, and that’s what I was telling my clients. All of my really wealthy clients were calling me and buying. When fear comes in, you have to do the opposite of fear,” Carbonaro added.
Diversification, Private Credit
Amid market volatility, she has continued to diversify her clients’ portfolios. Carbonaro also notes that some asset classes within alternatives, like private credit, have been a bright spot performancewise.
“My portfolios are a little active and a little bit passive,” she said. “On the active side, I have [investment] managers that have their own buy/sell discipline. They are doing their own stuff.”
Regarding her clients’ exposure to bonds, Carbonaro generally tries to avoid significant allocation changes unless there is “some sort of opportunity, or something changes significantly with the yield curve,” she explained.
“We use a lot of passive ETFs, where you will get whatever the return of the market is. But you have to make sure you are in all of the asset classes. Most of my clients are in 10 to 15 asset classes,” Carbonaro noted.
Within alternatives, she said that some private credit investments and hedge funds have performed well in portfolios, while other asset classes like real estate investment trusts have struggled in recent years, particularly following the pandemic.
Private credit assets under management have grown at an annualized rate of 14.5% in the past decade, according to a July report by J.P. Morgan Private Bank.
“The growth of private credit has far outstripped that of other fixed income asset classes. Over the past decade, corporate borrowing has grown at about 5.5% annualized; commercial and industrial bank loans at about 3%,” the report said.
“While detractors of private credit argue that this growth may pose a risk to financial-system stability, we don’t believe that’s a large enough share of the market to pose a systemic risk should we enter a recession. It is also worth noting that the pace of fundraising in private credit has started to taper,” it continued.
International Stocks Soar
Carbonaro noted that international stocks are finally having their time to shine.
“In 2025, international equity is doing better than the United States. I think that what’s interesting with [client] portfolios is [that] I always have a portion of my clients’ money in international, and now it’s finally doing better this year,” she said.
Morningstar research from August noted that international stocks have outperformed so far this year, as the U.S. dollar declined relative to other major currencies around the world.
“In contrast to the US, international equities carried low valuations coming into 2025,” wrote Dan Lefkovitz, a strategist for Morningstar Indexes. “They have underpromised and overdelivered. Meanwhile, the US is giving many investors pause, with its narrow and pricey market, mounting debt load, and policy uncertainty.”
Carbonaro said that she spent the earlier part of this year coaching clients to be resilient, even in the market chaos. She’s recommended against reactive, long-term changes in investment portfolios due to leadership or policy changes, for instance.
“I’ve had some clients who are just uncertain about the world in general, not just the market,” Carbonaro added. “They are wanting to be more conservative,” in their investments, but that has actually lost them money in some instances, she noted.
“We had quite the hiccup in April. That was super scary, and the market went down super fast. That was a massive correction in a short amount of time, but it bounced right back. But again, not a time to panic-sell,” she concluded.
Danielle Walker is a freelance journalist with 15 years of business reporting experience. She previously worked at Business Insider and Pensions & Investments, among other business publications. Her work has been published in the Financial Times, Barron’s and Chief Investment Officer. Danielle is currently based in Norfolk, Virginia.
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The views presented here do not necessarily represent those of Advisor Perspectives.
