Some 20 % of investment managers report they’ re putting the odds of a downturn at roughly 50 %, while another 25 % see the potential for a deeper correction.

“ This year’ s results show that risks investors once viewed as distant now feel far more immediate,” said Dave Goodsell,

executive director of the Natixis Center for Investor Insight.

The Natixis survey reflects the views of 515 institutions managing nearly $ 30 trillion worldwide, including pensions, insurers, foundations, endowments and sovereign wealth funds. Goodsell said the mood mirrors a late-cycle environment where inflation, policy uncertainty and geopolitics are reshaping strategy.

Geopolitics now tops the list of market threats. Forty-nine percent rank it above fears of a tech bubble, recession or fallout from government debt. Many point to tariff volatility, fraying country alliances and conflict flashpoints that could disrupt supply chains.

“ Markets have shown resilience, but institutions know they can’ t rely on the same playbook in 2026,” Goodsell said.“ They’ re preparing portfolios for a world where politics and economics collide more often.”

Institutions are also modeling weaker macro conditions. More than half expect job losses to rise. Nearly as many see corporate defaults increasing. Forty-two percent predict renewed inflation pressures. Housing costs are expected to climb. Together, the indicators are shaping a more cautious view of U. S. markets.

Even with the worries, return expectations remain firm. Institutions project average annual returns of 8.3 % next year— only slightly below long-term targets. Confidence in equities remains tied to hopes that artificial intelligence will drive productivity gains. Sixty-five percent believe AI will supercharge growth, even as many warn that the sector’ s rapid rise increases concentration risk.

“ AI is fueling optimism, but it is also creating structural risks that institutions can’ t ignore,” Goodsell said.“ Many are bullish, but they’ re prepared for turbulence.”

Sector views are shifting. Institutions expect outperformance in information technology, energy and financials. Consumer discretionary and consumer staples rank near the bottom. The respondents were split, however, on whether the U. S. or Europe will lead next year. They are equally divided on whether geopolitical shocks will roil markets or be shrugged off.

Many believe the U. S. is losing some of its shine. Seventy-six percent of the institutions plan to cut or hold steady on U. S. equity exposure. The Asia-Pacific region and Europe are gaining favor. Nine in 10 of the respondents planned to increase or maintain allocations to Asia-Pacific stocks, and about the same share expected to do so for Europe.

“ Investors are recalibrating their global exposure,” Goodsell said.“ Concerns about

U. S. politicization and inconsistent policy signals are pushing them to look abroad for balance.”

Uncertainty is pushing investors toward more diversified structures. Sixty-five percent of the respondents expected a 60-20-20 mix of stocks, bonds and alternatives to outperform the traditional 60 / 40 portfolio. Private markets have also continued to gain traction with these investors, 40 % of which said they planned to increase allocations to private equity and infrastructure. More than a third expected to add private debt.

“ Institutional teams are leaning harder on private markets for return potential and income stability,” Goodsell said.

Crypto is getting another look from these investors as well, Natixis reports. Thirty-six percent of them planned to increase their exposure to digital assets. But caution remains strong, as two-thirds still expect gold to beat crypto in 2026. The interest is rising faster than the capital commitments.

Active strategies among institutional investors are seeing renewed momentum as well. Sixty-two percent of the respondents expected active management to outperform passive in 2026 as markets become more fragmented and unpredictable.“ Active managers have more room to maneuver when the environment is uncertain,” Goodsell said.“ Institutions see 2026 as a year that rewards selectivity and discipline.”

Rate-cut expectations remain, but few foresee a smooth path. Only 7 % of the respondents thought the Fed would manage a gentle descent. Most expected volatility across stocks, bonds and currencies. The institutions anticipated more than one rate cut in 2026 but warned that higher unemployment and sticky inflation could complicate timing.

“ Investors are preparing for an unfamiliar macro landscape,” Goodsell said.“ They see more volatility. More political uncertainty. More structural risk. Their message is clear: 2026 will require stronger navigation.”

— Tracey Longo

12 | FINANCIAL ADVISOR MAGAZINE | DECEMBER 2025 WWW. FA-MAG. COM