Advisors shift to downside protection amid geopolitical risks

An InspereX Spring 2026 Pulse Survey of 783 financial advisors, released April 29, 2026, found a split view between market optimism and concern over external shocks. Respondents represented independent broker/dealers, registered investment advisers, banks and regional firms.

Seventy percent of advisors expect the S&P 500 to gain at least 5% by year-end. The survey shows 31% forecasting mid-single-digit returns for 2026 and nearly 38% projecting gains of 10% or more. The S&P 500 has traded in a relatively wide range year-to-date, reflecting tension between supportive fundamentals and macro uncertainty.

Geopolitical risk ranked highest among macro headwinds for advisors. Forty-three percent of advisors flagged geopolitics as their top concern; 45% of clients named geopolitics as their primary worry. Market volatility and inflation followed in advisors’ risk rankings. Inflation moved up compared with late 2025, overtaking recession as a top concern among advisors.

More than half of respondents, 54%, reported increasing use of downside protection strategies. Thirty-nine percent of advisors said those strategies are the main reason client assets remain invested rather than moving to cash. VettaFi data cited in the survey showed 66% of investors prefer downside protection ETFs over leveraged or inverse products.

Product development is aligning with demand for protection. Laddered outcome strategies and structured protection ETFs are being adopted to spread exposure across multiple entry points and reduce timing risk associated with single-outcome approaches. Advisors described these products as tools to help manage drawdowns while keeping clients invested.

Artificial intelligence appeared as a narrower, execution-focused opportunity in the survey. Twenty-eight percent of advisors identified AI as a key investment area, with attention on semiconductor makers, data centers and other physical infrastructure that supports AI. Respondents noted AI-related productivity gains, reshoring and automation expanding the number of industries affected.

Advisors reported increased client engagement and more tactical portfolio moves. Thirty-one percent said they are increasing client outreach and 12% reported stepping up tactical rebalancing. Interest in active ETFs rose as a way to adjust positions more quickly than passive index products. Respondents also cited macro crosscurrents to watch, including a weakening U.S. dollar, the normalization of monetary policy in Japan and the potential unwind of the yen carry trade as sources of market volatility.