Equities remain the most popular asset class among investment managers, who are moving away from US equities towards Europe and emerging markets, analysis from S&P Dow Jones Indices (S&P DJI) has revealed.

Its latest quarterly ARC Research Market Sentiment Survey examined expectations for major asset classes and market risks over the coming year, gathering responses from 78 investment management firms.

It found that investors continued to favour equities, alternatives, and bonds, despite concerns around market concentration and fiscal sustainability.

Equities remained investment managers’ most favoured asset class, although sentiment has cooled slightly from 2024 levels.

The analysis identified a trend of investors moving away from US equities and towards European and emerging markets equities.

Meanwhile, fixed income sentiment was “finely balanced”, with investors favouring investment-grade corporates over sovereign debt, while emerging market debt has seen a notable improvement in sentiment over the past year.

Sentiment towards alternatives remained positive overall, driven by gold, hard commodities, and hedge fund strategies.

However, private equity had seen a decline into net-negative sentiment.

The least favoured asset class according to the study was cash, which S&P DJI said reflected opportunity elsewhere, rather than an outright negative view.

When asked about the top risks facing investment markets in 2026 and beyond, 20.9 per cent pointed to equity market concentration amid fears that the strong performance of a small number of stocks could reverse.

This was followed by sovereign debt levels, cited by 19.7 per cent of respondents, reflecting rising fiscal imbalances and growing debt-to-GDP ratios.

Private market-led liquidity risk was identified by 16.2 per cent of investment managers, with S&P DJI noting this was a relatively new concern, likely driven by the rapid growth of semi-liquid vehicles.

Other risks included rising inflation (15.4 per cent), a potential recession in the US (11.1 per cent), and trade and tariffs (7.7 per cent).

“Sentiment toward fixed income markets is finely balanced, with investment grade corporate bonds expected to outperform sovereign debt over the coming year,” S&P DJI stated.

“Those surveyed were most cautious on high yield, instead favouring emerging market debt, which has seen a 44-point increase in net sentiment over the past 12 months.

“Equities remain the asset class with the most positive sentiment, albeit down from the levels witnessed in 2024. There has been a material swing in sentiment away from US equities and toward Europe and emerging markets.

“Despite above-average returns, sentiment toward the Information Technology and Consumer Discretionary sectors has declined, possibly reflecting increased volatility in AI-related stocks during 2025.

“The outlook for alternative strategies is seen as positive, but peering below the surface we find that this positivity is mainly directed at gold, commodities (hard) and hedge fund strategies.

“Private equity is the least favoured of the alternative sub-asset classes, with sentiment falling back into net-negative territory.

“Cash is the least favoured asset class, although this could be more a function of opportunities elsewhere rather than an outright negative view on cash itself.”

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