Model Portfolio Pulse: Outlook steady, equities favored

There are no changes to our economic outlook compared with last month. We remain constructive on U.S. growth in 2026 and expect inflation to remain contained, which should allow the Federal Reserve (the Fed) to continue cutting interest rates later this year. Solid nominal gross domestic product (GDP) growth should support corporate earnings, while accommodative monetary policy should help sustain equity valuations, particularly if growth remains above trend.

Key takeaways

• U.S. growth outlook remains constructive, with inflation contained and the Fed accommodative.
• Inflation risks from commodities and tariffs should be offset by domestic factors.
• U.S. growth outperformance should support the dollar.
• Structural themes such as artificial intelligence (AI), defense, and reshoring continue to shape markets.

Inflation, growth, and the policy backdrop

Some investors expect inflation to rise this year as higher commodity prices, the lingering effects of last year’s tariffs, and a weaker dollar push up imported goods prices and commodity-related components of the Consumer Price Index (CPI). While we acknowledge these risks, we believe domestic factors should play a meaningful offsetting role. In particular, housing remains a key influence on inflation and should help keep overall price pressures close to current levels or potentially lower.

From a growth perspective, we remain comfortable with global conditions but continue to expect the U.S. economy to outperform. If U.S. growth diverges from the rest of the world, this should provide support for the U.S. dollar, especially after its weakness in 2025. The appointment of Kevin Warsh as the next Fed chair should also help alleviate concerns about excessive political influence on monetary policy, reinforcing confidence in a continued accommodative stance as inflation remains contained.

Natixis model portfolio positioning

At the end of January, the themes in our portfolios included:

• Overweight stocks vs. bonds overall
• A tilt toward growth stocks over value stocks
• Overweight emerging market (EM) stocks
• Slightly overweight U.S. stocks
• Slightly underweight developed international stocks
• Overweight EM U.S. dollar–denominated government bonds
• Neutral to slightly underweight duration

There were no changes to our portfolio themes in January and no adjustments to model holdings.

We remain comfortable with our overweight allocation to equities relative to bonds. We see little risk of recession and expect the Fed to remain accommodative, which should continue to support earnings and equity prices. While a 5%–10% market correction is possible, we would view such a move as an opportunity to add exposure in favored areas of the market.

We continue to favor EM equities. Some parts of the EM universe are benefiting from the commodity price rally and rising resource nationalism, while others are supported by the ongoing artificial intelligence buildout. EM equities provide efficient exposure to these themes and offer diversification should U.S. growth outperformance fail to materialize.

We also remain overweight U.S. equities with a bias toward growth, though this tilt is under active review as cyclical areas of the economy and equity market show signs of improvement. In fixed income, positioning remains conservative given expectations for rangebound yields combined with the tightness of credit spreads. For now, we prefer to take risk in equities and remain opportunistic should volatility create more attractive entry points in fixed income.

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