Mind the Expectations Gap

Are investor expectations out of step with reality? With a decade of record-low interest rates and a booming tech sector still fresh in the memory, investors might be forgiven for expecting the treadmill of ever-increasing stock market returns to continue.

For many investors, it was a thrill ride that produced impressive returns for those with the nerve to hold on for the long run. The exclamation point came in 2023 and 2024 when the S&P 500® produced average annual returns of 25.55%, the Euro Stoxx 50 averaged 14.46%, and the MSCI averaged 20.34%, and market pundits were calling for more of the same in 2025.¹

Market returns were so strong and consistent that nearly half (48%) of 7,050 investors included in the 2025 Natixis Global Survey of Individual Investors say it "made investing look easy." This may partly explain the 28% gap in long-term return expectations between individuals and professional money managers.

The data shows that while financial professionals expect markets to generate 8.3% over the long-term, individuals globally are hoping to see a 10.7% increase. According to the survey, most financial advisers say this is unrealistic given how strong returns have been in recent year.

Nearly half of surveyed investors said that market returns in previous years "made investing look easy."

But a deeper look at sentiment over the long term among these investors in 21 countries suggests something has changed. And few think it will be that easy again.

While the 28% gap recorded in this year’s survey is large, it is significantly smaller than the 42% gap recorded in 2023, when individual investors were last surveyed. And it is far lower than the extreme recorded between 2020 and 2021, which saw the gap between what individuals expected to receive over the long term (13%) and what financial advisors thought realistic (5.3%) balloon to 173%.

The truth is, after 15 years of low interest rates, high returns, and relatively smooth sailing, the world suddenly feels less predictable in 2025. Geopolitics look increasingly fractious as two wars continue to play out, the trade norms that have been in place for decades are being challenged, inflation continues to loom over much of the global economy, and markets have endured several bouts of volatility.

With the combination of lingering inflation, higher interest rates, eroding consumer confidence, and geopolitical uncertainties, it is perhaps unsurprising that the gap between individuals and financial professionals has closed to a certain degree.

But the important thing to remember is that even moderate expectations still present significant risk. Pursuing double-digit returns can require significant allocations to equities, leaving investors exposed to higher levels of market volatility.

Faced with an unfamiliar market environment, investors need more help than ever to rationalize their return expectations with their appetite for risk, and understanding what higher interest rates mean for their investments.

¹Natixis Investment Managers Global Survey of Individual Investors, conducted by CoreData Research in February and March 2025. Survey included 7,050 individual investors in 21 countries. Visit im.natixis.com to read the full survey.