2025 Market review: resilience despite volatility
Despite ongoing geopolitical tensions, inflation concerns and policy uncertainty, 2025 delivered positive returns across most asset classes. A big theme last year was the rapid growth in artificial intelligence (AI). Companies investing in technology, data centres and infrastructure benefited, and this helped support the wider economy.
Equities performed well globally, supported by resilient corporate earnings and continued investment in technology and infrastructure. UK markets also produced positive returns, particularly among large international companies with strong cash flows and dividends. Bond markets recovered meaningfully, providing income and diversification as inflation pressures eased.
Alternative assets were notable outperformers. Gold and silver benefited from persistent geopolitical risk and central bank demand, with the possibility of further weakness in the US Dollar. Copper’s outperformance is due to electrification, AI infrastructure and energy transition spending which is expected to continue into 2026. The demand for these commodities is expected to continue as countries continue to hoard these commodities to protect local demand and for investors to hedge against inflation and currency weakness.
Gold: The World Gold Council reports that Investment (ETFs, bars, and coins) has overtaken jewellery as the largest demand driver in 2025/26 due to safe-haven buying.
Silver: Now functions primarily as an industrial metal. According to the Silver Institute, Industrial use (Solar PV, EVs, and AI electronics) accounts for nearly 60% of its global consumption.
Precious Metals Global Demand
Source: World Gold Council & Silver Institute
2026 Outlook: constructive but more demanding
The outlook for 2026 remains cautiously constructive, although markets are expected to be more volatile and returns more moderate.
Economic growth is expected to continue at a steady pace, inflation is easing gradually, and interest rates are likely to fall slowly rather than sharply as inflation is expected to remain sticky. Equity returns are expected to be driven more by earnings growth than valuation expansion, while bonds remain attractive for income.
Equities
With valuations elevated, returns are expected to be driven primarily by earnings growth rather than multiple expansion. Dispersion between winners and losers is likely to increase, favouring selective positioning rather than broad beta exposure. AI remains a structural theme, but leadership is expected to broaden beyond the technology sector and into sectors such as industrials, healthcare and selected consumer sectors.
Fixed income
Yields remain attractive by historical standards, supporting income-driven returns. Bonds are expected to continue playing a stabilising role, particularly in periods of equity market stress, although capital gains are likely to be limited.
Alternatives
Alternative assets continue to offer diversification benefits. Precious metals is expected to provide protection in periods of market stress, whilst industrial metals remain supported by structural demand from electrification and AI.
Portfolio Positioning
Portfolios remain positioned with an emphasis on diversification across regions, asset classes and return drivers. Quality and cash-flow visibility in equity holdings as well as Income generation whilst avoiding excessive concentration in any single theme or market will be an important consideration.
As always, we remain focused on long-term outcomes rather than short-term market noise, while remaining responsive to changes in the economic and policy environment.
Important Risk Information
The value of investments and the income from them can fall as well as rise, and you may not get back the amount originally invested. Past performance is not a reliable indicator of future results. Market returns are influenced by interest rates, inflation, currency movements, political events and regulatory changes. This communication is for information purposes only and does not constitute a personal recommendation.