Indexology^® Blog

Private wealth managers occupy an important position between public markets and end-investor portfolios. Their views can offer useful context on how market narratives are translating into allocation preferences, risk appetite and implementation choices. ARC Research,¹ now part of S&P Dow Jones Indices, tracks these views through its quarterly Market Sentiment Survey. In its 63^rd edition, the most recent survey reflects firms’ 12‑month outlook across major asset classes and implementation choices, offering insights into how private wealth managers are thinking about market exposure, risk budgeting and implementation choices.

Sentiment toward cash and equities increased at the expense of bonds and alternatives while, at the headline level, respondents remained most constructive on equities.

Beneath the Headline Results: Sectors, Bonds, Inflation and Alternatives

Additional highlights from the survey of particular relevance for CIOs include the following.

• Equity Sectors: Health Care and Energy (which were previously the most supported) saw declining support, while Information Technology and Consumer Discretionary (both had been exposed to significant mega-cap growth) garnered support. Industrials saw a notable gain in net sentiment.
• Fixed Income: Respondents were most negative on conventional government bonds (net sentiment was cited at -24 in the commentary). In contrast, sentiment regarding the classic route for inflation protection, index-linked bonds, improved materially.
• Alternatives/Real Assets: Hard commodities recorded the strongest support among sub-asset classes (net sentiment was referenced at 75), while gold saw a notable decline in net sentiment (down 20 points to 18).

Community Question

In addition to the main survey, we also ask a “community question.” This quarter, the focus was on portfolio implementation across asset classes, and the results for equities are highlighted in Exhibit 2.

The implementation results point to a continued shift toward vehicle-led portfolio construction, with passive and active building blocks now firmly embedded in how many firms access public markets—particularly in equities. Direct holdings remain a minority approach across most asset classes.

Exhibit 3 shows the reasons respondents cited for using passive allocations. Cost remains relevant, but the responses also point to diversification- and performance-related considerations.

This mix is consistent with passive vehicles such as index funds and ETFs being increasingly used as strategic “default” exposures, although a range of other use cases, including short-term tactical or liquidity needs, are likely to remain well represented. In this sense, the responses show some similarities with the patterns observed among some of the largest U.S. asset owners, as a recent post has highlighted.

How to Access the Full Report

The full survey includes the detail behind these headlines, including the full regional, sector and currency cuts and conviction shifts versus prior periods. Access to the full report is only for investment managers who complete the survey. If you are an investment manager and would like to be included in future surveys, or if you are interested in becoming a contributor to the ARC Wealth Indices, find out more on our website. Please note that survey results reflect respondent opinions at the time of the survey and positioning expectations, not investment advice.

¹ ARC Research, now part of S&P Dow Jones Indices, produces the ARC Wealth Indices: a range of peer benchmarks built from real-world, net-of-fees discretionary portfolio outcomes, grouped by realized risk. They provide wealth firms and oversight stakeholders a practical, outcome-focused reference point for governance, performance explanation and peer comparison.

What’s driving growth in ETF usage among insurers to all–time highs? S&P DJI’s Anu Ganti and Nick Didio share key takeaways across asset class, company size and geography from their latest research, “ETFs in Insurance General Accounts – 2026.” 

Global equities showed solid gains in the first half of 2026, supported by strong earnings in semiconductor-related industries. Conventional benchmarks rose across regions, with both global and developed markets posting double-digit gains, while emerging markets advanced at a slower pace, partly reflecting U.S. dollar strength. MENA equities continued to lag, weighed down by geopolitical tensions (see Exhibit 1).

Shariah-compliant equities outperformed conventional benchmarks across most major regions. The S&P Global BMI Shariah rose 15.3%, outperforming its benchmark, the S&P Global BMI, by 3.5%, while the Dow Jones Islamic Market (DJIM) World Index outperformed the Dow Jones Global Index by 2.9%. In developed markets, Shariah indices also modestly outpaced conventional peers, while the most pronounced gains were in emerging markets, where excess performance reached 7.0%. The MENA region remained the exception, showing modest underperformance (see Exhibit 1). See the Q2 2026 S&P Shariah and Dow Jones Islamic Market Indices Scorecard for more performance details.

Drivers of Shariah Index Performance in H1 2026

Sector positioning was a key driver of relative performance (see Exhibit 2). Information Technology—accounting for over 45% of the S&P Global BMI Shariah—rose 30.9% and contributed more than 12.2% to the index’s overall performance. Communication Services also supported relative gains, benefiting from stronger performance differentials versus conventional counterparts.

Conversely, structural underweights created headwinds. Limited weight in Financials and Utilities detracted 1.0% and 0.3% from excess performance, respectively, due to both underperformance versus conventional counterparts and lower weights.

Global Sukuk Posted Modest Gains

In fixed income, global markets experienced increased volatility amid sharp moves in oil prices and related uncertainties around inflation and policy rates. Investment grade bonds and sukuk performed modestly, with the iBoxx $ Overall Index and Dow Jones Sukuk Index (ex-Reinvestment) rising 0.6% and 0.7%, respectively. Yield levels remained comparable at around 5%, with sukuk offering higher spreads but shorter duration profiles (see Exhibit 3).

This article was first published in IFN Volume 23 Issue 29 dated July 22, 2026.

This content may be AI-assisted and is composed, reviewed, edited, and approved by S&P Global.

The first half of 2026 was notable for U.S. equity markets¹ and was characterized by sharp sector performance reversals, particularly in S&P 500^® Information Technology and S&P 500 Energy. Both sectors were up 20% YTD through Q2,² but they took very different paths to get there.

During the first quarter, Energy stocks had an outsized effect on the broader market as oil supply shortages, fueled by the war in Iran, rippled through supply chains. This pushed the Energy Select Sector up 38%, while the Technology Select Sector declined 8%. The tide turned in Q2 when enthusiasm surrounding AI companies and their related dependencies sparked a major turnaround in the Technology sector, sending the Technology Select Sector up 43%, while the Energy Select Sector fell 13% due to retreating oil prices and easing geopolitical concerns.

Looking across the pond, similar trends were observed in Europe. The S&P Europe 350 – Energy was up 40% in USD terms in Q1 while the S&P Europe 350 – Information Technology rose 42% in Q2.

Despite their similar sector co-movements in the short term, the historical outperformance of S&P 500 compared to the S&P Europe 350³ highlights the relevance of U.S. equities for European market participants (see Exhibit 2).

Adopting a sectoral perspective can help explain the long-term outperformance of the S&P 500 versus the S&P Europe 350. Exhibit 3 shows that the S&P 500 is concentrated in Information Technology, while the S&P Europe 350 has a greater weight in Financials and Industrials.

Another explanation for the S&P 500’s historical outperformance is its comparatively stronger within-sector performance. In fact, since 2020, 9 of the 11 GICS^® sectors in the S&P 500 outperformed their European peers.

Notably, Exhibit 5 shows that the overweight to Information Technology and the outperformance of stocks within the sector accounted for a large portion of the S&P 500’s outperformance versus the S&P Europe 350.

Recently, heightened geopolitical concerns and fluctuating oil prices have put the Energy sector back in the spotlight, while recent AI-related jitters have caused a pullback in Information Technology in both the U.S. and Europe. While we don’t know if another reversal⁴ is in order, evaluating the U.S. market through a sectoral perspective offers important context for European market participants.

¹ For more information, see our U.S. Dashboard.

² For more information, see our U.S. Sector Dashboard.

³ Tim Edwards et al., “Why Does The S&P 500 Matter to the U.K.?” S&P Dow Jones Indices LLC., Jan 17, 2023.

⁴ Anu Ganti, “Regimes, Reversals and Risk”, S&P Dow Jones Indices LLC., July 9, 2026.

For many market participants, the priority is not pursuing every inch of a bull market run but rather participating while managing downside risk. This desire for a more predictable investment experience has contributed to the growth of buffered (or defined outcome) strategies, which aim to balance participation in market gains with a defined level of protection against losses.

What Is a Buffered Strategy?

A buffered strategy combines equity investment (such as one that tracks the S&P 500^®) with a series of options designed to shape the potential outcomes. Typically, this involves positions in three options with the same maturity (e.g., one year): buying a protective put option, and selling a further out-of-the-money put option and an out-of-the-money call option to finance the purchase. The resulting payoff profile has three key features.

1. Buffer: Protection against moderate declines. For example, the S&P 500 10% Buffered Index Series targets a fixed downside protection of up to 10% of any decline in the underlying index at the option expiration.
2. Cap: A limit on upside participation, reflecting the cost of downside protection.
3. Market Exposure beyond Thresholds: Declines beyond the buffer are not mitigated, with no participation in gains above the cap.

The result is a narrower payoff profile, allowing market participants to trade off upside potential for a more defined range of outcomes.¹

Why Use Buffered Strategies?

While the primary motivation is risk management, a secondary reason can be building for the long term: by moderating the impact of downturns, buffered strategies may help maintain long-term participation in market gains.

Exhibit 1 compares the performance of the S&P 500 10% Buffered Index Series with the S&P 500 between rebalance dates. The index is designed to track the S&P 500 in years of modest gains while mitigating losses in years of modest declines. The downside protection feature has provided outperformance during market downturns, although some of those periods still produced negative results. Conversely, capped upside participation has led to underperformance during strong bull markets.

How Often Do Such Strong Bull Markets Occur?

To illustrate the trade-off between capped upside and downside protection, Exhibit 2 shows the historical distribution of one‑year rolling performance for the S&P 500 from March 1957 to June 2026.

• The average one-year gain was 8.9%, with a median of 10.6%.
• By comparison, the historical average call strike for the S&P 500 10% Buffered Index Series was 15.2%.²

This suggests that the S&P 500 10% Buffered Index Series may have matched or exceeded the S&P 500 in more than half of these one‑year windows on an absolute return basis—assuming the rebalancing horizon aligned with the one‑year period. Consistent with this observation, the S&P 500 10% Buffered Index Series matched or outperformed the S&P 500 in 52% of the one‑year intervals shown in Exhibit 1 between June 2011 and June 2026.

Risk-Adjusted Performance

Buffered strategies may also be evaluated through a risk-adjusted lens. From September 2018 to June 2026:

• The S&P 500 posted an annualized performance of 14.8% with 17.0% volatility.
• The S&P 500 10% Buffered Index Series averaged 11.1% performance with 10.6% volatility.

While historical performance was lower in absolute terms, the reduction in volatility resulted in higher performance-to-risk ratios compared with the broad equity market.

Hypothetical Portfolio Implications

Buffered strategies can also play a role in portfolio construction. Their distinct risk/return profiles and correlation dynamics may complement traditional equity and fixed income exposures. In environments where equity and bond correlations remain elevated, narrowing the range of potential outcomes for equity allocations may be particularly relevant.

As an illustration, if a classic 60/40 equity/bond index mix was hypothetically augmented to include a buffered allocation, it could have raised the effective equity exposure while maintaining similar volatility levels, resulting in higher hypothetical risk-adjusted performance (see Exhibit 4). This reflects the potential for buffered strategies to act as a bridge between growth-oriented and defensive allocations.

In short, buffered indices provide a transparent, rules-based framework for benchmarking and analyzing the potential outcomes from buffered strategies. By combining equity with option overlays, they reflect a structured approach to balancing participation and protection. For a deeper dive into buffered indices, please see “Defining Paths with Options-Based Index Strategies.”

¹ See “Introducing the S&P 500 Defined Outcome Index Series” for the examples of S&P DJI’s buffered indices

² The average call option strike price is calculated based on the back-tested data of the S&P 500 10% Buffered Index March, June, September and December Series between June 2011 and December 2025.