Paris and Boston-headquartered Natixis Investment Managers, which has over $1.4 trillion assets under management, has released a survey of strategists which highlights that market performance in the second half of 2026 will be driven by AI; although challenges remain, US equities will outperform.

Investors are heading into the second half of 2026 faced with a range of potential risks, from the US-Iran conflict and volatile energy markets to persistent inflation, yet despite this, nine out of 10 (91 per cent) Natixis strategists are optimistic that artificial intelligence will be the key factor driving market performance in the second half of 2026.

Of the 33 market strategists, portfolio managers, research analysts and economists from the Natixis Investment Managers affiliated group across Asia, North America and Europe, 88 per cent expect the AI sector will accelerate, while 12 per cent believe the bubble will burst in the second half of the year. The survey was conducted in partnership with CoreData Research in June 2026.

AI risks
However, despite the optimism, Natixis strategists are cautious of AI given the disruptive nature of the technology; 79 per cent 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 per cent 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.

A number of investment managers, for example J Stern & Co, noted recently that AI data centres, which are exceptionally hungry for energy and water resources, could slow down the growth of AI. Their construction has been surging recently due to demand for processing power from AI firms. But in view of their consumption of scarce resources and a public backlash, New York governor Kathy Hochul signed an executive order this month prohibiting the construction of major data centres for a year – the first state to make such a move.

Inflation and geopolitical risk
Inflation remains persistent heading into the second half, driven by the US-Iran-related spike in energy costs, the survey shows. Overall, 97 per cent of strategists rank inflation among the top risks (70 per cent medium and 27 per cent high) in the second half of this year, a jump from 79 per cent on the same question in the survey last year.

The US-Iran conflict was a 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 could be temporary after its latest collapse.

Natixis’ strategists do not see the Iran war as an isolated incident. In the second half of the year, 70 per cent said that an escalation or re-escalation of the war could represent a key risk, 64 per cent believe a new geopolitical conflict could arise and two thirds said it is the confirmation of a realignment of the world order.

Nearly eight in 10 strategists warned 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 believe that 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. Eighty two per cent believe that oil prices have already peaked; none expect prices to return to the lows seen at the start of the year, the survey shows.

Recession worries eased
Natixis strategists are less worried about a recession risk this year with only 3 per cent rating it high, 27 per cent said it will be a medium risk, compared with a total of 62 per cent 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 trade, 70 per cent of strategists said tariffs are now a long-term feature of trade assumptions, and nearly nine out of 10 see opportunity emerging from deglobalisation as supply chains become increasingly regional. Nearly eight in 10 believe the war in Iran will intensify competition between the US and China, yet 85 per cent believe the Chinese economy will remain resilient, the survey reveals.

"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,” Jack Janasiewicz, portfolio manager, Natixis Investment Managers Solutions, said. “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 defence sector
The defence sector has benefited from recent geopolitical uncertainties, as a result, seven in 10 strategists believe the sector is poised for sustained tailwinds stemming from the US-Iran conflict. Overall, 52 per cent think defence stocks will benefit from increased spending globally, only slightly down from the same question last year which saw 59 per cent having the same view on the sector.

In Europe, defence (24 per cent) ranks as the second most favoured sector, whilst this is a drop in sentiment from the 2025 Natixis strategist survey at 47 per cent, 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 10 believe that defence should be considered a sustainable investment, and 88 per cent of strategists believe the sustainable investing debate will continue to divide opinion, with over three quarters saying energy security will determine the pace of the energy transition.

New safe havens amid uncertainty
In fixed income, investors are rethinking safety, with nearly half of strategists believing that Treasuries are no longer the safe haven they once were and 55 per cent saying investment-grade credit may be better positioned to play that role.

In alternatives, two-thirds 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 10 of strategists expecting it to deliver the strongest returns.

Private credit concerns overstated
Despite the recent pressures in credit markets, over half of Natixis strategists said concerns about the asset class have been overstated, while seven in 10 believe the issues are isolated rather than systemic. In addition, 45 per cent think markets have become overly negative on private credit.

Natixis strategists are optimistic on private credit in Europe. More than half said 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 the second half of 2026
Despite the political and macro shocks, markets proved resilient in the first half of 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 expecting US equities to outperform, more than three-quarters believe that large-caps will outperform small-caps, with 82 per cent preferring growth over value.

Looking ahead, 42 per cent of strategists expect US markets to deliver the best returns in the second half 2026, driven by AI and large-cap growth stocks, up from 29 per cent who held the same view last year. Conversely, sentiment in Europe has dampened slightly this year, as only 15 per cent believe that Europe will perform best in the second half of 2026, compared with 38 per cent last year.

Strategists favour technology as the primary source of market returns. In both the US and Asia, nearly two thirds expect IT to be the top performing sector, all other sectors trailing with 10 per cent or less. Europe is more balanced: financials was the top sector, followed by defence and technology, suggesting that investors should diversify to manage a higher rate environment.

In contrast with other regions, Natixis strategists identify the top performance drivers in Latin America as being materials and energy, reflecting the region's global commodities and natural resources demand, alongside 12 per cent looking to industrials for leadership.

Strategists are also increasingly viewing AI as a longer-term investment, with only 45 per cent expecting to see returns on investment in AI capital expenditure within the next year. However, there are some more immediate benefits – more than half of Natixis strategists say that IPOs in the AI sector are likely to increase liquidity in private equity.