What Portfolio Analysis of 2024 Reveals About Investor Behavior

2024 saw many elections, global unrest, and a rare soft landing. Read 7 key insights on how investors allocated assets in 2024 to help guide your allocations in 2025.

Welcome to our annual look-back at how clients allocated portfolios. 2024 was marked by historic elections and global unrest. Almost 50% of the world’s population went to the polls last year. And military conflicts continued as the Russia-Ukraine war entered its third year and the fighting surrounding the Israel-Hamas war spread.

As a result of a slowing economy, a softening labor market, and cooling inflation, the Federal Reserve (Fed) began its interest rate-cutting cycle in September 2024. With the US market emerging from the second year of the bull market, the expectation of a soft landing outcome pushed stocks to all-time highs.

The SPDR Americas Research Team analyzed 460 client portfolios to gain insight into how investors behaved and adjusted their portfolios against this backdrop. We compared 2023 and 2024 portfolio allocations to their strategic benchmarks using our Portfolio Insights Analysis. And we evaluated the asset classes, security types, sectors, and duration of portfolios to understand exposures and any potential risks that may have been overlooked.

So, how did our clients adjust their allocations in 2024? We share seven observations on last year’s decision-making that can help guide your allocations in this year’s challenging market.

1. Moderate Asset Allocation Remains Investors’ Top Choice

The broad asset allocation of an average portfolio remained close to the traditionally balanced 60/40 portfolio, with almost a third of all analyzed portfolios allocating 55% to 65% assets to equities.

Last year’s market optimism and equity outperformance¹ was noticeable in portfolio shifts as allocation to equity mandates increased 4.1% from 2023, while allocations to fixed income and other assets (e.g., cash and commodities) decreased 2.6% and 1.5%, respectively (Figure 1).

Our Take

Our clients’ portfolios averaged out to a balanced asset allocation and did not change significantly year over year. This is likely because most of the portfolios seek to provide more strategic, long-term opportunities, albeit allowing for tactical shifts. In response to a soft landing outcome and optimistic outlook, investors gravitated toward riskier investments, reallocating some of their assets back to equities from bonds after doing the opposite in 2023.

2. ETFs Defended Their Top Spot

Clients made their largest average portfolio allocation to exchange traded funds (ETFs) in 2024. On average, ETFs comprised 69% of portfolios in 2024, which represents a 6% increase compared to 2023 (Figure 2).

When we look into the investment mandate of funds, approximately 95% of passive exposures were implemented through ETFs. On the other hand, the average portfolio allocation for active strategies is more balanced, with mutual funds and ETFs accounting for 50% and 48%, respectively.

Our Take

In 2024, ETFs were the predominant investment vehicle in our clients' portfolios, especially for passive investment strategies. This is likely because ETFs offer the benefits of inherent diversification, flexibility, greater transparency, and lower expense ratios. Indeed, ETFs’ median expense ratio is significantly lower than mutual funds’ (0.50% vs. 0.90%),² making ETFs widely recognized as a primary vehicle for passive investing.

Despite being born as a passive investment vehicle, ETFs have positioned themselves as an attractive option for active strategies to pursue specific outcomes in a transparent, liquid, and tax efficient manner and to potentially mitigate risks and capitalize on opportunities passive strategies might miss.

3. Finding Opportunities in Actively Managed Funds

Allocation to actively managed funds slightly decreased to an average level of approximately 41% of portfolio allocations in 2024, which represents a 2% drop from 2023.

When looking into the asset class focus of active funds, around 50% were fixed income-focused funds and 36% were equity-focused funds (Figure 3). Within the active fixed income and equity asset class focus, investors allocated the most to intermediate core-plus bond (28.51%) and US large blend (16.11%) Morningstar categories, respectively.

Our Take

Investors kept a balance between active and passive funds, favoring actively managed bond funds to exploit the elevated rate volatility that markets experienced last year.

Following the first rate cut in September, last year was characterized by shifting expectations for the Fed’s rate policy path, which further contributed to an already high rate volatility regime. Against this backdrop, investors relied on active fixed income managers to pursue opportunities in a broader universe, with the intent of taking advantage of multi-decade high interest rates while managing risks.

In the equity space, investors increased their average allocation to active equity funds by 4% in 2024 compared to 2023. With $39 billion in inflows last year, the US large blend was the Morningstar category that that took in the most of all active ETF flows in 2024.³

4. Investors Shifted Toward Cyclicals

While investors remained cautious, overweighting defensive stocks and underweighting cyclicals compared to their strategic benchmarks, their underweight decreased amid growing optimism and cyclicals outperformance.⁴

The average active weight of cyclicals decreased from aggregated -2.86% in 2023 to -1.65% last year. Most notably, the average underweight decreased to -2.32% for Technology stocks and to -0.25% for Consumer Discretionary, from -3.3% and -0.71% in 2023, respectively (Figure 4). An overweight to Real Estate increased by 0.25% while an overweight to Materials decreased by 0.47%. On the defensives front, the average portfolio was neutral compared to the benchmark in the Consumer Staples space and remained overweight in Health Care, Utilities, and Energy stocks. Health Care was the only sector where the overweight increased in 2024.

Our Take

Risk-on sentiment was apparent in tactical portfolio shifts. In absolute terms, the average portfolio allocation to Communication Services and Technology stocks increased the most year over year as the sectors also led equity performance. Overall, allocations to defensive sectors decreased by more than 4%, benefiting cyclicals. On the other hand, when comparing to strategic benchmarks, investors remained wary of the risks ahead and maintained a slight overweight to defensive stocks.

5. US Exceptionalism Made Home Bias Even More Apparent

In 2024, 81.3% of the average portfolio’s equity sleeve was allocated to US stocks. That compares to a 64.2% average US share in the global stock market,⁵ a 78.9% allocation in 2023, and an 80% strategic benchmark allocation — all illustrating a strong home bias (Figure 5). Compared to the average benchmark, the US overweight increased 0.90%, to 1.81%.

The biggest shift toward US stocks was observable within the large-cap space, pointing to increasing concentration.

Our Take

US equities hit multiple all-time highs in 2024, outperforming their developed market peers by more than 20%. In fact, over the past decade, the US stock market has beaten developed ex-US and emerging markets at least 75% of the time based on monthly rolling 1-year total returns.⁶ And while we expect the US to maintain its economic and earnings fundamentals advantage over the rest of the developed markets in the coming years, recent underperformance triggered by tariff uncertainty posing downside risks to economic growth and upside risks to inflation underscores the importance of geographic diversification of the portfolio.

6. Investors Moved Duration Further Out

Continuing the trend started in 2023, investors added duration exposure to their portfolios compared to the strategic benchmark.

While clients still held a significant overweight in ultrashort duration investments, they also decreased their active allocation to the short end of the duration spectrum and increased their average active exposure to duration buckets between three and ten years (Figure 6).

Our Take

The Fed’s aggressive rate increases in 2022 sent cash returns soaring and led to duration-induced losses for core aggregate bonds. With the expectation of rate cuts in 2024, investors adopted more of a total return mindset and moved further up the curve, taking on some duration risk given central bank rates in the US were expected to fall.

Adding to the strong inflows of the past two years, money market mutual funds’ assets reached $6.8 trillion at the end of 2024.⁷ Investors are now on the look out to reduce the reinvestment risk that will come with lower rates, given how sensitive ultra-short-term rates are to Fed policy rates.

7. Allocation to Commodities Decreased

While numerous elections and global unrest kept market volatility elevated, investors remained optimistic throughout 2024, shifting toward riskier assets and away from perceived safe havens like bonds, gold, or broader commodities. Although typically used as a portfolio diversifier, commodities were a part of only 18.4% of all analyzed portfolios, down from 22% in 2023 (Figure 7). Likewise, only 12.1% of portfolios held at least one physically-backed gold product compared to 15.8% in 2023.

Also, of those portfolios holding commodity products, the allocations decreased to an average of 3.1% in 2024 from 3.8% in 2023. And average allocations to gold funds fell from an average of 4.3% in 2023 to 3.2% in 2024.

Our Take

Investors have often used gold tactically in their portfolios to help preserve wealth with a relatively liquid asset that can potentially help navigate risk during market corrections or times of geopolitical stress or persistent dollar weakness. As disinflationary trends and softening economic data convinced market participants that markets had achieved a soft landing, investors may have looked away from precious metals. But in addition to gold’s tactical function, it can potentially play a more long-term role in portfolios, providing broad benefits that can potentially support strategic investment efforts across multiple business cycles.

How to Tackle the Challenges Ahead

Markets have experienced significant volatility so far in 2025, driven by shifts in economic trends, weaker consumer sentiment, fiscal policy uncertainty, and spiking short-term inflation expectations. Against this backdrop, markets are entering a new era of economic unpredictability.

That’s where we believe portfolio analysis can help investors unveil blind spots in their allocation decisions.

The SPDR Americas Research Team's Portfolio Insights Analysis can help guide allocation decisions to reduce the chance of taking on unintended risk or missing key opportunities in an uncertain market.

To learn more about our Portfolio Insights Analysis, please reach out to your SPDR representative. And visit Market Trends for our latest insights, ETF flows data, Chart Pack, and more.