Institutional investors face a widening gap between rising economic uncertainty and unexpectedly steady financial markets, according to new analysis from Ortec Finance.
The investment risk and return management specialist argues that technological, demographic, geopolitical and environmental transitions are driving global uncertainty to unprecedented levels, yet this instability has not translated into sustained market turbulence. Instead, volatility has appeared only in short, sharp bursts before quickly subsiding.
Ortec Finance distinguishes between two separate but related concepts: economic uncertainty and financial risk. Economic uncertainty, the firm explains, stems from unclear economic narratives and policy direction, and can be tracked using the World Uncertainty Index (WUI).
Financial risk, by contrast, is typically measured through near-term market volatility indicators such as the CBOE Volatility Index (VIX), which reflects how equity markets respond to immediate, price-relevant shocks.
According to Ortec Finance, the WUI reached an all-time high in 2025, its highest level since the index began in 1990, signalling a marked rise in perceived global risk. Meanwhile, the VIX has shown only episodic spikes over the past two years, normalising quickly each time rather than remaining elevated.
This divergence, Ortec Finance says, leaves investors navigating a paradox: subjective uncertainty remains persistently high due to structural and geopolitical pressures, summarised as “many things could go wrong”, while markets only react temporarily when specific triggers emerge, reflecting a sense that “something will go wrong soon” rather than sustained alarm.
Ortec Finance warns that this dynamic, combined with deep global interconnectedness, non-linear feedback loops and mounting structural strain, could pave the way for prolonged stagnation, persistent inflation and rising financial market uncertainty. In a worst-case scenario, the firm suggests these pressures could converge into a polycrisis, where cascading and interconnected risks reinforce one another, testing institutional investor confidence in ways that differ sharply from previous downturns.
To help institutional investors understand and prepare for such scenarios, Ortec Finance has published a whitepaper, ‘Polycrisis and institutional investment: Why interacting risks require a broader scenario framework’, which explores how these compounding risks could reshape investment decision-making and risk management approaches.
For more, read the full story here.
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