Model Portfolio Pulse: Strong momentum with rising risks
May 28, 2026
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3 min
We remain constructive on markets, supported by improving labor and manufacturing trends, strong corporate earnings, and continued AI-driven investment. But after a powerful rally, risks are building. Elevated oil prices, rising bond yields, and frothy areas of the technology sector could limit near-term upside and increase the likelihood of volatility.
Key takeaways
- Growth remains supported by strong earnings, improving labor trends, and AI-driven investment.
- Elevated oil prices and rising bond yields could weigh on consumption and growth.
- Market gains and excesses in parts of technology raise the risk of near-term consolidation.
Strong growth backdrop faces mounting pressures
The global growth backdrop remains constructive, supported by a combination of cyclical improvement and structural investment trends. The U.S. labor market has shown signs of reacceleration, manufacturing activity has improved, and corporate earnings have remained notably strong. Together, these dynamics point to an economy that continues to generate forward momentum despite lingering uncertainties.
At the same time, a powerful secular driver – the build-out of AI infrastructure – continues to underpin global growth. Technology capex tied to data centers is contributing meaningfully to GDP, helping offset potential headwinds from tighter financial conditions or elevated input costs.
However, the market environment is becoming more nuanced. After a sharp rally since late March, valuations in segments like semiconductors and memory stocks, are beginning to exhibit more speculative, bubble-like characteristics. This raises the risk that even modest disappointments could trigger a period of consolidation or a pullback.
At the same time, macro pressures are building. Oil prices remain significantly higher than a year ago, and if sustained, higher energy costs are likely to act as a drag on consumption. While the wealth effect from strong asset prices has helped offset the impact so far, that support may prove less durable if elevated oil prices persist.
Bond yields have also been trending higher globally as central banks consider rate hikes and headline inflation begins to firm. Rising yields can tighten financial conditions and create additional pressure on interest-rate-sensitive areas like housing, as well as broader consumer demand.
These crosscurrents are also showing up at the regional and asset-class level. Within emerging markets (EM), some countries and regions have recently come under pressure as rising inflation raises the risk of rate hikes. This reinforces the need for a more selective approach, even within areas supported by longer-term secular themes.
Taken together, resilient growth drivers alongside rising valuation and macro risks suggest a market environment that remains supportive over the medium term but is increasingly vulnerable to near-term volatility.
Natixis model portfolio positioning
We remain modestly overweight equities while taking a selective approach to risk, reflecting both confidence in the broader growth backdrop and awareness of building headwinds. Within portfolios, this balancing act is evident in regional preferences and active positioning decisions. We continue to express a favorable view on certain EM opportunities, including Latin America via the ILF Latin America 40 ETF, while closely monitoring recent underperformance tied to inflation pressures and potential rate hikes. At the same time, we are maintaining flexibility, with dry powder available and a focus on deploying capital selectively as more attractive entry points emerge.
At month-end, model positioning was characterized by:
- Slightly overweight positioning in stocks versus bonds
- A tilt toward growth stocks over value stocks
- An overweight position in U.S. stocks
- An overweight position in EM stocks
- An underweight position in DM (developed markets) international stocks
- Neutral to slightly underweight duration exposure
We continue to monitor evolving market conditions closely, balancing improving growth fundamentals with emerging risks as we position portfolios for both near-term uncertainty and longer-term opportunity.
