Key takeaways

• Markets proved resilient in 2025, with many major indices finishing higher despite persistent volatility.

• Interest-rate expectations, rather than actual rate moves, played a significant role in shaping market sentiment.

• Returns became increasingly concentrated, particularly within large global technology stocks linked to AI.

• Commodities reflected longer-term structural demand alongside familiar cyclical swings.

• The forces that shaped 2025 are likely to remain relevant as investors head into 2026.

  
  

Investors spent much of the year navigating shifting interest-rate expectations, uneven economic data, geopolitical tension and rapid technological change. Headlines were frequent and often unsettling. Yet despite this backdrop, many major equity markets finished the year higher.

Rather than being defined by a single shock or crisis, 2025 was shaped by a small number of recurring themes that influenced how investors thought about risk, opportunity and long-term positioning. Taken together, these themes help explain both market performance and investor behaviour over the year.

Markets moved forward, but not evenly

Equity markets delivered mixed but generally positive outcomes through 2025, with gains concentrated in specific sectors and companies rather than spread evenly across the market. 

In the U.S., share markets were largely supported by ongoing economic growth and continued earnings momentum in a concentrated group of large technology companies. These companies played an outsized role in index performance, meaning market returns were closely tied to whether earnings expectations were met or exceeded, rather than reflecting strength across the markets as a whole.

In Australia, market outcomes were more subdued and varied by sector. Bank shares performed relatively steadily, supported by strong capital positions and consistent earnings, while resource stocks moved in line with changes in commodity prices and global growth expectations. By contrast, businesses that rely more heavily on consumer spending, as well as some construction, transport and manufacturing firms, experienced more uneven performance. This reflected ongoing pressure on household budgets, higher operating costs and tighter financial conditions through the year.

Overall, market gains in 2025 were far from uniform. Index-level performance often masked very different outcomes across sectors and individual companies. Periods of market weakness did occur, but where company fundamentals remained sound, pullbacks were often followed by recoveries.

Interest rates stayed front and centre

Interest-rate expectations remained one of the most influential forces shaping markets in 2025.

Inflation continued to ease across many developed economies, shifting the focus from whether inflation was under control to how long restrictive policy settings might remain in place. In the U.S., investor attention increasingly centred on the timing and pace of potential rate cuts, with markets reacting sharply to economic data that challenged or reinforced those expectations.

In Australia, the outlook was more finely balanced. The Reserve Bank maintained a cautious approach, weighing progress on inflation against the resilience of economic activity and the labour market. As a result, local interest-rate expectations were more stable, though still sensitive to key data releases and policy signals.

These differing policy paths influenced more than just bond markets. Currency movements, equity valuations and sector leadership were all affected by expectations around where rates might settle, highlighting how monetary policy continues to ripple through multiple asset classes.

Artificial intelligence dominated, but leadership was concentrated

Artificial intelligence remained one of the most powerful market narratives of 2025, particularly in global equity markets.

Investment in AI-related infrastructure, hardware and software supported earnings growth for a relatively small group of large technology companies. These businesses became increasingly influential within major indices, meaning overall market performance was often driven by a narrow group of stocks.

As the year progressed, elevated valuations placed greater scrutiny on earnings delivery and forward guidance. Markets became less forgiving when results fell short of expectations, even among companies closely associated with long-term AI adoption trends.

For investors, 2025 reinforced an important nuance. Transformational technologies can reshape industries over time, but periods of strong performance are often followed by consolidation, rotation and renewed focus on fundamentals.

Commodities reflected structural demand, not just cycles

Commodities played a meaningful and at times volatile role in markets throughout 2025.

Gold attracted attention during periods of uncertainty and shifting rate expectations, continuing its traditional role as a defensive asset. Industrial metals such as copper were influenced by longer-term structural themes, including electrification, infrastructure investment and the energy transition, alongside shorter-term movements tied to global growth expectations.

Resource equities reflected this mix of drivers. Smaller and mid-cap stocks delivered some of the year’s strongest gains but also experienced sharp drawdowns, underscoring both the opportunity and risk associated with commodity-linked investments. Price movements were often amplified by changes in sentiment, funding conditions and expectations around future demand.

What 2025 reinforced for investors

Across these themes, several observations stood out:

• Volatility remained a normal feature of markets rather than an exception.

• Returns varied widely across regions, sectors and investment styles.

• Earnings quality and balance-sheet strength became increasingly important as valuations rose.

• Market narratives shifted quickly, often ahead of underlying fundamentals.

For self-directed investors, 2025 was a reminder that while conditions change, disciplined decision-making and maintaining perspective remain essential.

How 2025 may shape the year ahead

As investors look toward 2026, the forces that shaped 2025 have not disappeared.

Interest-rate policy, the sustainability of earnings growth, the next phase of AI adoption and global economic conditions are all likely to remain central to market discussions. Rather than marking a turning point, 2025 helped set the backdrop against which these themes may continue to evolve.

For investors, the challenge remains navigating this environment with an informed, measured approach, staying focused on long-term objectives rather than reacting to every headline.