Model Portfolio Pulse: Growth resilient, risks rising
April 07, 2026
-
3 min
We remain constructive on the outlook for U.S. growth in 2026, supported by resilient economic activity and the potential for monetary easing later this year. However, recent geopolitical developments and mixed economic signals have introduced new risks that warrant close monitoring. A spike in oil prices following escalating tensions involving Iran has raised questions around the inflation path, while labor market data suggests growth momentum may be slowing even as survey data remains firm. This evolving backdrop continues to guide how we think about portfolio positioning.
Key takeaways
- U.S. growth remains resilient, but rising oil prices and softer labor data present new risks.
- Inflation is still expected to remain contained, though energy prices could complicate the outlook.
- Diverging signals between labor market data and survey indicators bear watching.
- Portfolio positioning reflects comfort with the global backdrop while acknowledging higher uncertainty.
Supportive growth backdrop faces new inflation tests
As stated last month, we remain constructive on 2026 U.S. growth prospects and expect inflation to remain contained, which should allow the Federal Reserve (the Fed) to continue cutting interest rates at some point later this year. That said, the beginning of March brought heightened geopolitical tensions involving Iran and a subsequent spike in oil prices. This development creates risk to our inflation forecast. At the same time, February labor market data signaled that growth momentum might be slowing. These two factors bear watching.
It is still too soon to know how persistent elevated oil prices will be. If the conflict resolves quickly and oil prices retreat to prewar levels, our inflation view should remain on track. However, if tensions persist and Iran is successful in keeping oil prices elevated, headline inflation would likely move higher and the risks of pass through to core inflation would become more serious. This scenario could derail our inflation outlook and prevent the Fed from providing further accommodation.
These risks are even more pronounced in Europe. The European Central Bank targets headline inflation rather than core and has historically been more sensitive to oil price shocks. While elevated oil prices may prevent further rate cuts in the U.S., in Europe they could result in rate hikes. This creates additional risk for developed international equities and the euro.
Mixed economic signals complicate the growth outlook
On the growth side, we are focused on the divergence between weakening U.S. labor market data and strong survey indicators. The Bureau of Labor Statistics’ February employment report showed job losses totaling 92,000, and downward revisions to the prior two months resulted in zero net job creation since May of last year, shortly after tariffs were announced. At the same time, both Manufacturing and Services PMIs (Purchasing Managers' Index) printed above 50, signaling continued economic expansion, and details such as the New Orders components were also constructive.
For now, the U.S. economy appears to be sustaining resilient growth momentum, but the divergence between these data sets calls underlying economic strength into question. Slower job growth and moderating wage gains could reduce income momentum, while higher energy costs stemming from geopolitical tensions may act as a tax on household spending. If this combination persists, consumer spending could weaken further, increasing the risk of a broader growth slowdown. This remains a key scenario we are watching to guide portfolio positioning.
Natixis model portfolio positioning
At the end of February, the themes in our portfolios included:
- Overweight stocks versus bonds overall
- Tilt toward growth stocks over value stocks
- Overweight U.S. stocks
- Overweight emerging market (EM) stocks
- Neutral developed market international stocks
- Overweight U.S. small caps
- Overweight EM USD-denominated government bonds
- Neutral to slightly underweight duration
We made one series of adjustments to our models in mid February. This included increasing our equity overweight from 2% to 3%, trimming our EM equity overweight to 1%, moving to a neutral position in developed market international equities, and establishing an overweight position in U.S. small caps. We also swapped our position in State Street Technology Select Sector SPDR ETF (XLK) for Invesco S&P 500 Equal Weight Technology ETF (RSPT), took profits in iShares Latin America 40 ETF (ILF) and closed the position, and took partial profits in iShares JP Morgan USD Emerging Markets Bond ETF (EMB).
These trades mostly reflected our comfort with the global economic backdrop and acknowledgement of the year to date strength in cyclical assets, which have been supported by a healthy global environment.
