Nearly eight in 10 North American institutional investors expect markets to pull back in 2026, assigning almost even odds (49%) to a correction and a one-in-five chance of a deeper decline, according to new survey findings released today from Natixis Investment Managers.
Investors cite rising geopolitical tensions and concerns about AI-driven disruption as the biggest risks heading into next year, even as many continue to see opportunities across global and private markets.
“The outlook on 2026 is clouded for institutional investors,” said Dave Goodsell, Executive Director of the Natixis Center for Investor Insight. “After years of strong returns, risks that once felt distant are more tangible. With uncertainty surrounding geopolitics, growth, and inflation, investors are positioning portfolios to weather whatever conditions 2026 may bring.”
The Natixis Investment Managers Institutional Investor 2026 Market Outlook shows institutions leaning more heavily on diversification and active strategies, favoring a 60:20:20 mix to navigate what they expect will be a more volatile environment.
Underlying these shifts are key economic risks North American investors are weighing against continued market opportunity:
• Investors fear geopolitical shock—especially with China: Geopolitical risk is a top concern for 43% of North American investors, with 75% saying political disfunction in major markets is a growing threat to market stability. Further, 71% say a realignment in global security will force investors to reevaluate their investment theses for certain countries. China remains a major worry—57% fear South China Sea conflict and 66% cite rare earth dominance—though 60% think markets will stay indifferent.
• AI fuels optimism, but bubble fears grow: Concern over an AI-driven tech bubble is rising, cited by 40% of North American investors (up from 25% in 2025). Yet optimism endures for tech, as 62% of North American investors expect the information technology sector to outperform the market and over half (55%) are bullish on Magnificent 7 stocks.
• Inflation fears resurface amid tariff uncertainty: Nearly half (47%) of North American investors think tensions between inflation and employment will force difficult Fed decisions. On the inflation side of the mandate, four in 10 North American investors (40%) now see re-inflation as a key risk, up from 24% in 2025. Tariffs are adding to inflation worries, with 61% saying they are fueling renewed price pressures. Investors are somewhat split on whether the trade war will continue, with 56% saying it will rage on vs. 44% saying it will ease. On the labor side, two-thirds (66%) expect rising unemployment and a third (33%) believe labor-market weakness will accelerate rate cuts.
• Recession fears tick up, but still runway for rally: North American investors’ fears of recession ticked up from 20% for 2025 to 38% for 2026. However, six in 10 (60%) see that the rally still has runway in 2026. Investors will be eyeing growth in 2026, as almost seven in 10 (69%) saying that slow growth could be a harbinger of a recession.
2026 to favor active strategies
For North American investors, top portfolio risks for 2026 are valuations (63%), inflation (54%), and concentration risk (43%), all up from last year’s outlook.
“Active management provides the discipline and insight needed to identify durable opportunities and build greater resilience into portfolios.”
Liana Magner, Natixis
Volatility concerns are also rising: 61% expect higher equity volatility and 39% expect more bond volatility. To manage these pressures and sustain returns, investors are leaning into diversification and active management, with nearly two-thirds (63%) expecting active strategies to be favored in 2026.
“Institutional investors recognize that 2026 will demand more nuance,” said Liana Magner, Head of Retirement and Institutional in the U.S. “With almost two-thirds saying their active strategies outperformed in 2025—and a similar share expecting active approaches to be favored in 2026—there’s a clear acknowledgment that today’s markets require more than passive exposure. Active management provides the discipline and insight needed to identify durable opportunities and build greater resilience into portfolios.”
Over seven in 10 (71%) investors believe the 60:20:20 portfolio (equities: fixed income: alternatives) will outperform the traditional 60:40 mix:
• Equity optimism split amid concentration and consumer concerns: North American institutional investors remain cautiously optimistic on equities, with 69% expecting rate cuts to help push the S&P 500 higher. Confidence is strongest in defense stocks (81% bullish). Most (66%) expect gains to broaden, though 62% worry a significant new AI technological development could bring concentration risk to the forefront of equity markets. Top sectors expected to outperform the market include the IT sector (62%), energy sector (44%), and utilities sector (41%). Optimism is weakest for consumer-driven sectors—only 12% expect consumer discretionary to outperform—highlighting concerns over softening consumer strength in 2026.
• Fixed income outlook lifts on expected rate cuts: Nearly half (47%) of North American institutional investors expect inflation/unemployment tensions to force tough Fed decisions. Most anticipate rate cuts in 2025, with 57% expecting one to two rate cuts. This supports a cautiously positive bond outlook, with 58% bullish on fixed income. Even as 54% foresee higher corporate defaults, many are still adding investment-grade, high-yield, and emerging-market debt to secure income amid inflation uncertainty. In this environment, 68% say active management is essential for fixed income.
• Private markets remain favorable, but investors more discerning: Institutional investors are sharpening their focus on private markets in 2026, with 45% increasing allocations to private debt and 34% to private equity. Confidence runs high—67% are bullish on private equity and 63% on private debt—though 79% are applying greater deal scrutiny because of overcrowding concerns.
• Crypto gains legitimacy, but adoption remains cautious: Although 44% of investors now view cryptocurrency as a legitimate opportunity—up from 38% in 2025—only 20% currently have exposure. Looking ahead, 45% of North American investors expect to be invested by 2026. Still, four in 10 current crypto investors plan to boost allocations next year. More than half (53%) believe more accommodative U.S. regulation will be a turning point for global adoption.
A key shift heading into 2026 is the growing trend among institutional investors to look outside of the U.S. for investment opportunities, driven by rising concerns about politicization. Globally, 63% say the politicization of U.S. institutions weakens the country’s investment appeal, a view shared by 57% of North American investors.
Global investors now lean slightly toward Europe (52%) over the U.S. (48%), yet most North American investors (60%) still expect U.S. markets to outperform. Even so, 68% expect stronger international performance and plan to diversify abroad, increasing allocations to Europe (30%), Asia-Pacific (34%), Latin America (22%), and especially emerging markets (38%). The shift underscores efforts to manage concentrated domestic risk while capturing new growth from supply-chain realignment and industrial policy.
About the survey
Developed with CoreData Research, Natixis IM surveyed 515 global institutional investors in September and October 2025 who collectively manage $29.9 trillion in assets for public and private pensions, insurers, foundations, endowments, and sovereign wealth funds worldwide. Survey participants include 95 North American institutional investors responsible for managing over $6.79 trillion in assets.
A full copy of the report on the Natixis Investment Managers Institutional Investor 2026 Market Outlook can be found here: https://www.im.natixis.com/en-intl/insights/investor-sentiment/2025/institutional-outlook
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