As the final full trading day of 2025 draws to a close, investors worldwide are reflecting on a remarkably robust year for financial markets, marking the strongest annual performance in six years.
A Banner Year for Global Equities
The MSCI All Country World Index, a key benchmark tracking stocks across both developed and emerging economies, has soared by over 21% during the year. This impressive rally represents its best annual showing since 2019 and its second-best performance since the global financial crisis in 2009.
However, the path was far from smooth. The year witnessed significant volatility, notably in early April when markets slumped following the announcement of former President Donald Trump's proposed 'Liberation Day' tariffs. A sharp rebound followed as the anticipated trade measures were scaled back.
Shifting Tides: US Lags, Europe and Asia Shine
In a notable shift, US markets failed to keep pace with major global indices as investors sought to diversify away from American assets. While the S&P 500 delivered a solid 17% gain, it was outpaced by several international peers.
Germany's DAX climbed 22%, the UK's FTSE 100 rose 20%, and Japan's Nikkei surged an impressive 26%. This divergence was accompanied by a severe downturn for the US dollar, which endured its worst first half-year in more than five decades.
European Resilience and the AI Boom
Sylvain Broyer, Chief Economist for EMEA at S&P Global Ratings, highlighted Europe's unexpected economic stamina. "One of the lessons from 2025 is that Europe’s economy was better than expected at absorbing external shocks," Broyer stated.
He pointed to strengthening household consumption, falling unemployment, and a recovery in confidence and productivity. Surprisingly, European currencies like the euro and pound appreciated sharply against the dollar despite tariff pressures. Broyer also cited substantial German fiscal stimulus, which boosted growth forecasts for 2026–2028.
The year was undeniably dominated by artificial intelligence, fueling spectacular gains for some tech giants. Alphabet, Google's parent company, skyrocketed 65% on the back of its Gemini service's growing market share. Chipmaker Nvidia rose 40%, adding over $4.5 trillion in value, while Oracle gained 17%.
In contrast, Microsoft posted a more modest 15% increase. The frantic rollout of AI infrastructure also raised concerns over the levels of corporate debt being issued to fund it.
With several Asian markets, including Japan, South Korea, and Thailand, closed after Tuesday's session, the annual assessment is largely complete. London's market will conclude the year with a half-day session on Wednesday.
