The U.S. stock market has never looked more top-heavy. A handful of mega-cap tech and AI stocks now dominate the S&P 500 Index, with the nine largest names—each bigger than Warren Buffett’s Berkshire Hathaway—making up nearly 40% of the benchmark. That kind of concentration risk has investors rethinking the old "never bet against America" mantra and searching for new hedges.
And the answer, at least for now, seems to be: cash, precious metals, and crypto.
ETF Flows Tell the Story
"If you break down category ETF flows, it’s cash, precious metals, and then crypto," said Todd Sohn, senior ETF strategist at Strategas Securities, on CNBC’s ETF Edge. "They’re clearly being adopted by more mainstream investors."
The logic is straightforward. With so much exposure tied up in tech and AI, investors are looking for uncorrelated assets to balance portfolios. That’s led to a surge in flows into money market funds, gold ETFs, and spot bitcoin ETFs.
Rethinking the 60-40 Portfolio
Some strategists are even floating a 60-20-20 model—stocks, bonds, and alternatives like gold and crypto—as a replacement for the classic 60-40 stock-bond mix.
For now, allocations remain modest. Sohn noted that most allocation papers recommend 1–3% in crypto and 3–7% in gold. But the trend is clear: investors are inching toward diversification beyond traditional equities and bonds.
Gold: Still the Classic Hedge
Gold has had a volatile stretch, with heavy selling this week, but it’s still up more than 60% year-to-date. Prices hit record highs above $4,400 per ounce earlier this month, supported by central bank buying, a weaker dollar, and geopolitical risk—the so-called "debasement trade."
The SPDR Gold Shares (GLD) ETF has pulled in about $6.8 billion in flows over the past month, with gold funds nearing $40 billion in net inflows this year.
Crypto: From Speculation to Strategy
Crypto has also gained traction, though gold has outpaced it. Bitcoin is up 17% this year, while Ethereum has gained 15%. The real game-changer has been the launch of spot bitcoin ETFs, which have brought institutional money into the space.
The iShares Bitcoin Trust (IBIT) now manages nearly $90 billion in assets, according to VettaFi, making it one of the largest spot bitcoin ETFs. That kind of scale has helped shift digital assets from speculative side bets to legitimate portfolio tools.
ETFs as the Gateway
Sohn pointed out that ETFs have always been the vehicle for new strategies. "We started with large-cap equities in ’93, gold and emerging markets in 2004, and now we have covered call and yield-max products," he said.
That innovation has allowed investors to manage risk differently—whether through derivative-based ETFs, alternative exposures, or regulated crypto products.
The Bottom Line
With stock market concentration risk at historic highs, investors are hedging their bets. Cash, gold, and crypto may not be Buffett’s idea of value investing, but they’re quickly becoming the new normal for portfolio diversification.