# Market Outlook &
Strategic Priorities

An analytical overview of emerging trends, shifting investor sentiment, and the key decisions shaping the next growth cycle.

Q2 2026 · Confidential

#### Table of Contents

Overview
01

### Executive Summary

High-level findings and key takeaways from the latest quarterly assessment.

02

### Macroeconomic Sentiment

Investor perspectives on growth, inflation, and risk factors in the current environment.

03

### Capital Allocation Trends

How portfolios are shifting in response to policy changes and volatility signals.

04

### Strategic Recommendations

Actionable priorities for leadership teams navigating an uncertain landscape.

05

### Risk & Opportunity Matrix

Evaluating the trade-offs between defensive positioning and offensive growth bets.

06

### Conclusion & Next Steps

Summary of implications and recommended follow-up actions for stakeholders.

#### Executive Summary

Key Findings

## Sentiment has shifted measurably from the prior quarter

73%
Bullish on three-year outlook
An all-time series high, reflecting renewed confidence in medium-term fundamentals despite near-term uncertainty.

- Highest reading since the survey began in 2018
- Cross-sector consensus, led by tech and industrials
- Driven by clarity on rate trajectory and AI capex

↑ +11 pts vs. prior quarter
55%
Expect recession before year-end
Down significantly from the prior reading, indicating easing fears of a severe or prolonged contraction.

- Soft-landing scenario now the modal expectation
- Median timeline pushed from Q2 to Q4
- Severity expectations also moderated meaningfully

↓ -36 pts vs. prior quarter
4.5%
Median inflation expectation
Investors expect price pressures to remain elevated through the end of the current calendar year.

- Wage and services inflation remain the stickiest
- Energy disinflation slower than originally modeled
- Long-run anchor steady at 3% for the next decade

↑ +0.3 pts vs. prior quarter

#### Macroeconomic Sentiment

Data Overview

## Current perspectives on the economy and markets

22% of respondents
Bullish for the current calendar year
Steady from prior quarter, anchored by tariff and policy uncertainty.
51% of respondents
Bullish for the next calendar year
Up from 38% last quarter as the rate path firms up.
60% of respondents
More bullish on the economy than three months ago
A 22-point improvement, the largest sentiment swing in two years.
53% of respondents
More bullish on equities than three months ago
Tech and financials led the upgrade; energy and utilities lag.
3.6% median
Expected inflation rate for the next two years
Down 0.4 pts; long-run expectations remain anchored at 3.0%.
2.7% median
Expected real GDP growth for the next two years
A modest upgrade reflecting easing recession fears.

#### Investor Priorities

Analysis

## What investors want companies to focus on right now

- Growth and protecting the top line remain the leading priority, cited by a clear majority as essential in the current cycle.
- Cash flow resilience has risen sharply in importance as liquidity conditions tightened across credit markets through Q3.
- Supply chain stability ranks consistently high, reflecting the lasting operational scars of recent global disruptions.
- Margin preservation and cost discipline have moved from defensive levers to first-line strategy in investor conversations.
- AI capex remains the most-discussed structural theme, but with rising attention to monetization timelines.

"The shift from growth-at-all-costs to profitable, sustainable expansion is the defining theme of this cycle." Senior PM, multi-strategy fund
63%
Prioritize top-line growth
55%
Prioritize cash flow resilience
33%
Prioritize supply chain stability

Notably absent from the top of the list: ESG-led capital allocation, which has dropped 24 points year-over-year as investors recalibrate toward returns-first mandates.

#### Risk Factors

Ranking

## Most important macroeconomic concerns among investors

Consumer price inflation
79%
Interest rates & central bank policy
69%
Geopolitical risks
39%
Liquidity tightening in capital markets
37%
Asset price volatility
25%
Public-sector debt & spending
22%
Climate & ESG-related risks
18%
“

> In this environment, the companies that will win are those that can balance operational discipline with strategic flexibility.

Senior Partner, Strategy Practice — Global Investment Forum 2026

#### Strategic Roadmap

Process

## Recommended approach to navigating the current cycle

1
Assess Resilience
Evaluate balance sheet strength and operational buffers under stress scenarios.
2
Protect Core Revenue
Defend market position and pricing power in segments with durable demand.
3
Optimize Costs
Streamline overhead while preserving capacity for high-return investments.
4
Selective Growth
Deploy capital toward opportunities with clear path to profitability.

#### Deep Dive

Detailed Analysis

## Changes in investment practices and valuation frameworks

### Assuming higher cost of capital

- Using elevated discount rates to reflect tighter monetary conditions
- Shifting hurdle rates for internal capital allocation decisions
- Emphasizing shorter payback periods for new projects

### More conservative valuation approach

- Greater weight assigned to downside and bear-case scenarios
- Reduced reliance on long-dated terminal value assumptions
- Increased sensitivity analysis around key drivers

### Value over growth momentum

- Pivoting toward earnings-supported valuations
- Favoring demonstrable unit economics over scale narratives
- Reassessing premium multiples for unprofitable segments

### Cash flow & balance sheet focus

- Prioritizing free cash flow generation as a key screening metric
- Analyzing working capital needs under inflationary input costs
- Reviewing leverage ratios and refinancing schedules

### Bottom-up stock selection

- Reducing macro-driven top-down factor exposures
- Intensifying fundamental research at the security level
- Building conviction through differentiated data sources

### Shorter-term orientation

- Narrowing forecasting windows for revenue and margin
- More frequent reassessment of position sizing
- Active hedging around event-driven volatility

# Thank You

For questions or a deeper discussion of these findings, please reach out to the research team.

Download Full Report

research@company.com · www.company.com

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