Nearly seven out of 10 CEOs (69%) express optimism about the global economy's outlook over the next 12 months, according to the latest edition of the EY CEO Outlook Pulse Survey and the Global CEO Confidence Index. This optimism persists despite the numerous challenges that CEOs face, including navigating a complex and volatile business environment shaped by emerging technologies, shifting consumer behaviors, and an uncertain geopolitical landscape.

The survey, which gathered insights from 1,200 senior executives worldwide, reveals that CEOs are struggling to keep pace with the rapidly evolving external environment. Many CEOs admit they are not responding quickly enough to disruptions in their industries, with fewer than four in 10 (38%) participants reporting that they are proactively managing these external forces. This figure rises to 54% among optimistic CEOs, compared to just 8% among those who feel less confident.

Despite the challenges, the positive outlook among CEOs, combined with a realistic understanding of the risks and benefits posed by disruptive external forces, is expected to boost merger and acquisition (M&A) activity in the coming year. Among optimistic CEOs, 78% report that they are proactively reviewing their portfolios in line with their core strategies, adjusting to market disruptions. Furthermore, 98% plan to engage in some form of transaction over the next 12 months. Overall, more than a third (37%) of CEOs are planning an acquisition next year, with the figure rising to 59% among the most optimistic, compared to only 16% of those who are less confident.

Given the current environment, CEOs recognize that traditional portfolio evaluation methods need to change. Conventional strategic planning and portfolio management processes are no longer effective. Nearly a quarter (24%) of respondents report that their portfolio reviews are not aggressive enough, while 23% find the process overly passive. CEOs are expected to adopt a more flexible and proactive approach to portfolio management, focusing on accelerating innovation and transformation to stay ahead of the competition.

As a result, M&A activity is expected to maintain its momentum in the coming months, primarily through strategic alliances, joint ventures, and divestitures. Almost half (47%) of CEOs plan to pursue a strategic partnership with a third party over the next 12 months. Meanwhile, 44% aim to engage in divestitures or public listings, and 37% will prioritize mergers and acquisitions.

The United States, the United Kingdom, Canada, Mexico, and Germany are expected to be the top investment destinations in the coming months. Key sectors attracting attention include banking, asset management, media and entertainment, consumer products, and insurance.

The survey highlights several disruptive forces impacting CEOs' agendas. Emerging technologies stand out, with 38% of CEOs planning to leverage these innovations to drive growth, create new business models, and gain a competitive edge. Additionally, CEOs are acutely aware of the changing customer needs (36%), the shifting global economic and geopolitical landscape (35%), regulatory changes (35%), and supply chain pressures (33%).

Interestingly, fewer than a third (29%) of CEOs view climate change and environmental issues as top disruptive forces. Similarly, only 29% of CEOs believe that access to human talent will be a major challenge over the next 12 months.