As we look back at the financial landscape of 2025, the year was predominantly defined by a transition from “easy growth” to a more disciplined, high-stakes environment. While the feared global recession remained at bay, the market moved through significant bouts of volatility—from the “Liberation Day” tariff announcements to the longest government shutdown in U.S. history.
While there were many nuances and themes that moved the markets throughout the year, we’ve highlighted three we feel truly defined 2025 and how we’re looking into the new year.
1. The “Second Act” of Artificial Intelligence
In 2023 and 2024, AI was a story of hardware, specifically, the chips and servers needed to build the foundation. In 2025, the narrative shifted from infrastructure to implementation.
Investors began demanding proof of return on investment (ROI). This “Second Act” saw a massive surge in Agentic AI—systems capable of not just answering questions but executing complex tasks autonomously in sectors like healthcare and cybersecurity.
- The Power Hungry: A critical sub-theme was the “AI-Energy Nexus.” The massive electricity demand from data centers revitalized the energy sector, leading to a resurgence in nuclear energy and smart-grid infrastructure.
- Broadening the Winners: While 2024 was dominated by the “Magnificent Seven,” 2025 saw market leadership rotate. Software companies and industrial firms that successfully integrated AI to expand margins began to outperform the pure-play hardware giants.
For 2026, it’s becoming clear these themes of energy demand and broadening leadership can also be seen as risks to the AI narrative. Can energy supply be created at the speed in which it is demanded? Broadening market leadership would be seen as a healthy step forward, though due to the size of the Mag 7, it could put a cap on broad market returns for a period of time.
2. Geopolitics & the “Rewiring” of Global Trade
2025 was the year “deglobalization” moved from a talking point to a structural reality. The introduction of reciprocal tariffs and a push for “technological independence” fundamentally altered supply chains.
- The Multipolar World: We observed a “rewiring” of trade routes. Instead of a single global highway, trade became a series of regional hubs. This benefited “connector” economies like India, Vietnam, and Mexico, which served as vital links between shifting power blocs.
- Reshoring Momentum: U.S. industrial and infrastructure sectors saw significant tailwinds as companies moved production closer to home to mitigate tariff risks. This shift was supported by fiscal measures like the “One Big Beautiful Bill” (OBBBA), which provided targeted stimulus for domestic manufacturing.
There will continue to be plenty of moving pieces in the tariff narrative in the years to come. Specifically, by the time you read this, the law used to justify the tariffs previously implemented (the International Emergency Economic Powers Act – IEEPA) may have been struck down by the Supreme Court. While this would cause uncertainty for the companies most impacted by tariffs, the Trump administration is likely to find other ways to implement its tariff agenda.
3. The Great Diversification: Beyond U.S. Mega-Caps
After years of U.S. large-cap dominance, 2025 was the year of the “Everything Rally”—but with a twist. For the first time since the pandemic, all major asset classes posted positive returns, yet the best opportunities were found in the corners of the market that had previously been ignored.
- The Return of Gold and Alternatives: Amidst policy uncertainty and a weakening trade-weighted dollar, Gold reached record highs (peaking near $4,400/oz in late 2025) as central banks diversified their reserves.
- Fixed Income Rebirth: As the Federal Reserve moved into a steady easing cycle, cutting rates by 75 basis points in the second half of the year, bonds regained their status as a reliable “shock absorber” for portfolios.
- International Resilience: While U.S. growth remained “exceptional,” markets in Japan and parts of Emerging Asia offered attractive valuations and structural reforms that captured the attention of global institutional capital.
We view the opportunity set as positive for assets beyond U.S. large-caps to continue their momentum. The Fed continues to project further monetary stimulus in the form of interest rate cuts throughout 2026. Hard assets such as gold and other commodities are likely to remain volatile given the increase in geopolitical activity between Ukraine/Russia, U.S./Venezuela, Israel/Iran, etc.
Looking Ahead
The lessons of 2025 are clear: concentration is a risk, and flexibility is a requirement. As we enter 2026, the focus remains on “quality”. We continue to see the longer-term outlook as positive given the strong fundamentals of the U.S. consumer and stimulative policy from fiscal and monetary agencies. With that said, when everything looks good, one must ask “What could go wrong”? We remain diligent in adjusting for potential risks while maintaining our core strategy through broad market diversification.
