Market performance in H2 2026 will be driven by AI, despite geopolitical uncertainty and persistent inflation: Natixis Investment Managers Strategists Survey 2026

91% of Natixis strategists believe AI will be the key factor driving market performance in H2 2026 88% believe productivity gains from AI will translate into higher corporate profits 67% expect US equities to outperform in H2, with 42% identifying US markets as likely to deliver the best returns globally Over half (55%) say concerns about private credit have been overstatedInvestors are heading into the second half of 2026 faced with a wide range of potential risks, from the ongoing US-Iran conflict, to volatile energy markets to persistent inflation, yet despite this, nine out of ten (91%) Natixis strategists are optimistic that Artificial Intelligence (AI) will be the key factor driving market performance in H2 2026.Of the 33 market strategists, portfolio managers, research analysts and economists across the Natixis Investment Managers affiliated group, (88%) expect the AI sector will accelerate, and only (12%) believe the bubble will burst in the second half of the year.However, despite optimism, Natixis strategists are still cautious on AI given the disruptive nature of the technology, as (79%) believe volatility driven by AI fears is here to stay and could potentially spread across multiple industries. Concentration risk is also a worry, as (85%) rank it as a medium or high risk in the second half of the year, due to only six or seven AI companies driving a disproportionate level of market returns.Inflation and geopolitical risk Inflation remains persistent heading into H2, driven by the US-Iran related spike in energy costs. Overall, (97%) of strategist's rank inflation among the top risks (70% medium and 27% high) in the second half of this year, a notable jump from 79% on the same question in the survey last year.The US-Iran conflict was a key catalyst behind the inflation spike in the first half of the year, with the closure of the Strait of Hormuz doubling oil prices. While a joint memo of understanding between the US and Iran helped ease energy costs, this relief may be temporary. Natixis' strategists do not see the Iran war as an isolated incident. In the second half of the year, (70%) say that an escalation or re-escalation of the war could represent a key risk, (64%) believe a new geopolitical conflict could arise and two thirds (67%) say it is the confirmation of a realignment of the world order.Nearly eight in ten strategists (79%) warn of a renewed energy crisis in the second half of the year, given the potential threat of the shipping lane closing again. Looking further ahead, the consequences may not all be negative. Over two-thirds (67%) believe the war will ultimately serve as a catalyst for increased investment in renewable energy and they do not expect energy prices to revisit the extremes seen earlier in the year. (82%) believe oil prices have already peaked, none expect prices to return to the lows seen at the start of the year.Recession worries eased Natixis strategists are less worried about a recession risk this year with only (3%) rating it high, (27%) saying it will be a medium risk, compared with a total of (62%) who rated recession as a medium or high risk in last year's survey. This year, strategists are more concerned about forces reshaping the economic landscape. On monetary policy, nearly six in ten (58%) think the Fed will hold rates in H2, while more than half (52%) believe rate hikes are more likely for the Bank of England, and roughly three-quarters say the same for both the ECB (76%) and the Bank of Japan (76%). Fewer than half (45%) of Natixis' strategists believe a central bank mistake poses a meaningful risk in the second half.On trade, 70% of strategists say tariffs are now a long-term feature of trade assumptions, and nearly nine out of ten (88%) see opportunity emerging from deglobalisation as supply chains become increasingly regional. Nearly eight in ten (79%) believe the war in Iran will intensify competition between the US and China, yet 85% believe the Chinese economy will remain resilient.Jack Janasiewicz, Portfolio Manager, Natixis Investment Managers Solutions, comments: "The first half of 2026 has presented a challenging environment for investors as they navigate the simultaneous pressures of geopolitical disruption, persistent inflation, and an energy shock. While recession fears have eased, inflation remains a persistent risk alongside ongoing geopolitical tensions. Yet, despite these headwinds, our strategists see clear opportunities and remain optimistic heading into the second half of the year—specifically pointing to AI, US equities, and an expected outperformance of large-caps over small-caps. Ultimately, investors must look past the near-term noise and position themselves to capture these opportunities."The rise of the defense sectorThe defense sector has benefited from recent geopolitical uncertainties, as a result, seven in ten strategists (70%) believe the sector is poised for sustained tailwinds stemming from the US-Iran conflict. Overall, (52%) think defense stocks will benefit from increased spending globally, only slightly down from the same question last year which saw 59% having the same view on the sector.In Europe, defense (24%) ranks as the second most favoured sector, whilst this is a drop in sentiment from the 2025 Natixis strategist survey at (47%), it is clear that there is still opportunity given the ongoing security concerns. There is also a shift in how investors define sustainability, as nearly six in ten (58%) believe defense should be considered a sustainable investment, and 88% of strategists believe the sustainable investing debate will continue to divide opinion, with over three quarters (79%) saying energy security will determine the pace of the energy transition.New safe havens amid uncertaintyIn fixed income, investors are rethinking safety, with nearly half (48%) of strategists believing Treasuries are no longer the safe haven they once were and 55% saying investment-grade credit may be better positioned to play that role.In alternatives, two-thirds (67%) of strategists believe a 60:20:20 alternatives diversified portfolio will outperform the traditional 60:40 allocation in the second half of the year. Infrastructure stands out as the clear favourite in Europe, with three in ten (30%) of strategists expecting it to deliver the strongest returns. In a region marked by slower growth and ongoing economic uncertainty, investors appear drawn to the stable cash flows and lower correlation that infrastructure can provide. Energy/commodities follows well behind at 15%, while private credit (12%) and absolute return strategies (12%) attract interest from investors seeking additional sources of income and diversification.In the face of geopolitical uncertainty, inflation concerns, and market volatility, investors may be driven to turn to cash as a perceived safer alternative than equity and bond markets. However, Natixis' strategists warn that cash leaves investors exposed to inflation risk (67%),and may not offer returns sufficient to meet long term goals (52%), meaning more attractive returns elsewhere in the market which could be missed (45%).Private credit concerns overstated Despite the recent pressures in credit markets, over half (55%) of Natixis strategists say concerns about the asset class have been overstated, while seven in ten (70%) believe the issues are isolated rather than systemic. In addition, (45%) think markets have become overly negative on private credit.Natixis strategists are particularly optimistic on private credit in Europe. More than half (52%) say the private credit opportunity looks better there than it does in the US and that recent liquidity concerns will have little impact on long-term demand for the asset class.Opportunities in H2Despite the political and macro shocks, markets proved resilient in H1 2026, with the S&P, Euro Stoxx, and FTSE all generating modest single-digit returns. While the first half is a story of geopolitical disruption and economic change, Natixis strategists are sticking with the themes that have driven markets for the past two years, with two-thirds (67%) expecting US equities to outperform, more than three-quarters (76%) believe large-caps will outperform small-caps, and 82% preferring growth over value.Looking ahead, 42% of strategists expect US markets to deliver the best returns in H2 2026, driven by AI and large-cap growth stocks, up from 29% who held the same view last year. Conversely, sentiment in Europe has dampened slightly this year, as only 15% believe Europe will perform best in H2 2026, compared to 38% last year.Strategists favour technology as the primary source of market returns. In both the US & Asia, nearly two thirds (61%) expect IT to be the top performing sector, all other sectors trailing with 10% or less. Europe is more balanced, financials was the top sector (27%), followed by defense (24%) and technology (18%), suggesting investors look to diversification as a means to help navigate a higher rate environment.In contrast to other regions, Natixis strategists identify the top performance drivers in Latin America as being materials (33%) and energy (27%), reflecting the region's global commodities and natural resources demand, alongside (12%) looking to industrials for leadership.AI as a long-term investment themeNatixis strategists long-term view of AI is changing, as the technology has become more widely adopted and more deeply embedded within businesses. Overall, (97%) believe that AI will provide second and third order gains as the AI narrative expands beyond the companies that write the code, build the chips and construct the infrastructure to support it. Nearly nine in ten (88%) believe productivity gains from AI will translate into higher corporate profits.Strategists are increasingly viewing AI as a longer-term investment, with only (45%) expecting to see return on investment on AI capital expenditure within the next year. However, there are some more immediate benefits, as over half (52%) of Natixis strategists say that IPOs in the AI sector are likely to increase liquidity in private equity.The full survey report can be found here:link for INTL = https://www.im.natixis.com/en-intl/insights/investor-sentiment/2026/strategist-outlooklink for US = https://www.im.natixis.com/en-us/insights/investor-sentiment/2026/strategist-outlookNotes to Editors

Market performance in H2 2026 will be driven by AI, despite geopolitical uncertainty and persistent inflation: Natixis Investment Managers Strategists Survey 2026

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