2026 may be in full swing, but, ultimately, 2025 set the stage for it – creating opportunities to embrace and challenges to navigate, especially within financial markets and the economy. The following are four areas of interest for your board and finance committee to be aware of.

Strong Returns, but Rising Concentration Risk

In a year of seemingly endless headline events in the global economy and geopolitical landscape, markets defied all obstacles to push upward for the third consecutive year, extending what has been a stubbornly resilient bull market rally. While 2025’s positive returns across global markets were certainly welcomed by investors, they dragged along with them the ever-rising risk of market concentration which has reached historic levels.

Analysis: Manning & Napier. Source: Bloomberg (12/31/2022 – 12/31/2025).

A certain degree of economic concentration also defines the current environment. Massive investment in AI-related computing infrastructure and datacenters has dominated capital spending and the US stock market. A consumption economy is being largely held up by wealthy consumers with healthy asset balances, thanks to those same AI-driven market returns. The potentially precarious nature of such a market and economic landscape is clear.

The Rise of Alternatives – What to think?

If one investing theme has dominated the conversation among non-profits recently, other than stock market concentration, it’s been the rise of alternatives, and more specifically, private market investing.

Accessibility and popularity of private markets have skyrocketed in recent years, and mostly for good reason: alternative investments – especially within the private markets – offer diversification, reliability, and premiums that are typically not available within traditional asset classes. On the other hand, there are transparency, liquidity, and fee considerations to always be mindful of when considering alternatives in any investment program. For many non-profits, these tradeoffs often can make a lot of sense and be a valuable addition to a broad portfolio.

Looking forward, non-profits must exercise the prudence necessary to navigate an expanding universe of alternative offerings and identify the most impactful opportunities to enhance their portfolios while supporting short- and long-term financial goals.

Alternative Investment Toolkit for Non-Profits

With more accessible options than ever before, now is the time to explore what they can do for your organization’s portfolio. This comprehensive toolkit includes a guidebook covering the basics of alternative investments, and our Due Diligence Checklist to help you evaluate and select an alternative investment manager with confidence.

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Interest Rate Environment

A primary source of risk on economists’ and investors’ radars going into 2026 is the Federal Reserve, and more specifically, the path forward not only for interest rate policy but for the make-up and leadership of the group itself.

Even setting aside political divides and external pressures, agreement within the membership of the Federal Open Market Committee has been more challenging than usual recently, a function primarily of the conflicting crosswinds facing the economy in the form of a precarious job market and moderate but stubborn inflation. The silver lining from a policy perspective is that, from both a monetary and fiscal perspective, the general stance is more accommodative than restrictive for growth, and all indications point to that continuing for the foreseeable future. The upside risk to inflation remains, however, within that context and will need to be carefully monitored for any reacceleration.

The Return of Diversification

The defining characteristic of the previous three years in markets may be showing signs of abating. The narrowness of returns discussed earlier, which has resulted in more and more market concentration, has also left the “rest” of the market primed for sunnier days, especially if a supportive policy backdrop and associated economic resilience manifest in wide-spread earnings strength.

Market segments that have been merely forgotten about amidst the AI exuberance, as well as those that may be more downstream beneficiaries of AI capabilities in the future, may all present attractive opportunities for investment looking forward. At the same time, expectations are sky-high for companies that have been the primary return drivers to date. In such an environment, diversification and prudent risk management are likely to play a key role in navigating a market that may look quite different than recent years.

The Year to Come

While 2026 brings its own set of circumstances, it doesn’t bring a crystal ball to know exactly what’s to come. That’s why we believe in proactive planning and active portfolio management - to stay flexible enough to seize opportunities and prepared to navigate challenges.

The information in this paper is not intended as legal or tax advice. Consult with an attorney or a tax or financial advisor regarding your specific legal, tax, estate planning, or financial situation.