2025 Market Commentary

A rundown of the markets in 2025, provided by Laurium.

2025 will be remembered as a noteworthy and challenging year in global equity markets. Investors were faced with substantial uncertainty in the form of shifting geopolitical narratives, President Trump’s weaponisation of US trade policy, and rapidly evolving AI technology progress. As a result, elevated stock market volatility (especially earlier in the year) provided investors with many reasons to diversify risk exposure.

The US dollar, hitherto a safe haven in times of risk aversion, weakened materially despite stronger-than-expected US GDP growth. US Treasuries likewise sold o amid higher yields. Investors had to recalibrate the US Federal Reserve’s monetary policy reaction function in the face of mounting political pressure to cut interest rates and contradictory labour and inflation data. As a result, gold bullion and other supply-constrained metals gained support as a store of value. This anti-US dollar trade became commonly referred to as “the debasement trade”.

Regionally, non-US performance highlights for the year as a whole included Europe, Japan and China. European equity markets were bolstered by a strong fiscal U-turn from the new German coalition and increased EU defence spending. Japanese equities reflected increased optimism that political change and the absence of deflationary fears would add to newfound growth momentum. In China, industrial overcapacity and weak domestic demand are still weighing on the
economic outlook. However, investors responded positively to DeepSeek, which provided a cost-eective AI solution for technology companies. Other Asian markets benefited from supportive capital inflows and the broadening technology trade.

Against this multi-faceted and challenging investment backdrop, it is pleasing to report on a further rally in global stock indices and in the fund returns through the end of the fourth quarter 2025, building on the strong gains reported for the first nine months of the year. While equity markets were undoubtedly supported by the US Federal Reserve cutting policy rates in September, October and December, the key ingredient supporting share prices into the close remained persistently strong earnings growth, in particular reports posted by the bellwether US technology shares which have led this equity bull market higher since early 2023.

Nevertheless, share returns broadened out all year given the diversifying capital flows described earlier, and the MSCI ACWI Index reflected strong gains of over 22% in US$ for the year as a whole, ahead of the gains made by the US technology-heavy S&P500 Index.

2026 Outlook

Headline equity valuations are demanding by historical measures, but prospective yields from cash or fixed interest instruments are not all that compelling either. This is especially true when one considers the inexorable rise of fiscal indebtedness in many developed national accounts, and looser monetary discipline in prospect. As a result, high quality growth equities underpinned by resilient cashflows remain a very appealing investment proposition, albeit with greater volatility
risk. In this context, patient investors with the appropriate longer-term investment horizon will be rewarded by maintaining exposure through inevitable drawdowns.

Management teams in fund portfolio companies remain highly optimistic about the order pipelines for electrification, factory automation, defence, road infrastructure, and data centres. The portfolio retains diversification across sectors and demand-drivers to withstand unstable economic and geopolitical conditions. As before, our research remains focused on identifying well-managed, financially healthy companies with tailwinds for growth, improving their odds of
beating market expectations over time.

For more information on our funds, please visit our funds page or the websites of our advisors. More information can also be found on our Appointed Representative Services. Professional investors only.