Calm markets aren’t safe markets, advisors warn
Learmonth said an active covered call strategy can raise write levels during quiet stretches, usually up to a pre-specified maximum, to offset cheaper options.
Higher volatility lets the strategy write against less of its underlying equity position, write at higher strike prices, or both, he added, so it can “participate to a greater extent in any potential market rally” without losing cash flow stability.
“A historically seasonally weak period for markets through September, elevated geopolitical tensions, an uncertain path for US monetary policy and US mid-term elections all threaten to lead to higher levels of market volatility,” Learmonth told Wealth Professional.
He described a barbell that pairs growth and pro-cyclical exposure in technology or industrials with defensive positions in health care and utilities, which in his view can “reduce overall portfolio risk while remaining invested for a time when the clouds of uncertainty part.”
Equity and corporate debt valuations appear increasingly stretched compared with historical levels, the Bank of Canada said in its Financial Stability Report 2026, published May 28, adding that stretched valuations raise the likelihood of a sharp correction if a shock occurs.
