Rethinking Downside Protection in Fast Markets

Alfred Lam - 26 février 2026

Markets don’t fall for the same reasons twice. Find out why downside protection is often an illusion—and why speed matters more than style or sector selection.

Investing—whether in fixed income or equities—is rarely a smooth, linear journey. Because of this, many investors place a high value on “downside protection” during their investment period. You could argue that long‑term investors shouldn’t worry about short‑term fluctuations and should focus solely on the final outcome. But investing is emotional for many people, and the experience along the way matters. True zero downside essentially exists only in cash; everything else can, at best, only offer less downside. Some investors believe that choosing certain geographies, sectors or styles provides better protection, but the truth is that it all depends on why markets fall.

Consider 2020. When the global economy shifted into an “at‑home” mode during the pandemic, growth‑oriented technology companies—Amazon, Google, Meta, Zoom, Microsoft—became the strongest performers, even as economic growth weakened. Yet after the tech bubble burst in 2000, that same sector was among the worst performers because valuations had stretched too far. Similarly, some believe value stocks offer downside protection because they trade at discounts. But those discounts often reflect real concerns about the underlying businesses, and any external shock can magnify those issues, pushing prices even lower.

Unless you know the exact reason why markets will decline, predicting which areas will hold up best is extremely difficult. And frankly, if you could reliably identify that, the most logical move would be to sell everything before the downturn altogether.

In my experience, the most effective form of downside protection is speed of change. As new information emerges, we must quickly assess how markets will react and adjust our positioning accordingly. I often refer to this as the “new investment paradigm,” where information travels at extraordinary speed and is reflected in prices almost instantly.

When I started in the industry 25 years ago, we relied on fax machines, newspapers and face‑to‑face meetings to send and receive information. Investing was about reaching the right conclusion, and you had ample time to gather data, analyze it and decide. Today, the landscape is entirely different. You still need the right conclusion—but you also need to get there as fast as possible. It’s undeniably more demanding.

About the Author

Alfred Lam, MBA, CFA

Alfred Lam, Senior Vice President, Co-Head of Multi-Asset, joined CI GAM in 2004. He brings over 23 years of industry experience to his portfolio design, asset allocation, portfolio construction, and risk management responsibilities, which include chairing the multi-asset investment management committee and sizing investment bets to drive added value and manage risk. Alfred holds the CFA designation and an MBA from York University Schulich School of Business. He is a recognized leader in multi-asset investing in Canada. During his tenure, his team has won multiple investment awards, including the Morningstar Best Fund of Funds, and saw assets growing four-fold.

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