Macro Snapshot – January 2026

December 2025 Market Trends: Year-end optimism meets early 2026 geopolitical headwinds

As 2025 came to a close, it delivered an unusually constructive backdrop for investors, with economic data increasingly pointing to a soft landing, monetary policy turning decisively supportive, and markets embracing an environment where growth and liquidity aligned. Risk assets powered through persistent geopolitical uncertainty, ending the year on firm footing as investors stayed laser-focused on fundamentals amid the year-end rally.

What truly stood out was not just the strength of returns, but their impressive breadth, equities surged broadly, commodities caught a bid, and precious metals hit fresh highs, as easing inflation and falling interest rates reinforced confidence across the board. Yet beneath the surface, divergences widened, a reminder that not all assets were rising equally, setting the stage for more selective positioning in the new year.

Early 2026 is already injecting fresh pulses of volatility, with escalating U.S. tariff implementation, coupled with looming Supreme Court rulings on their legality and simmering geopolitical flashpoints surfacing as key headwinds. Ongoing Middle East tensions, persistent Ukraine risks, and heightened grey-zone pressures around Taiwan are keeping traders on edge, potentially amplifying supply chain disruptions, energy price swings, and broader risk-off moves if any escalate. While the constructive macro foundation from late 2025 provides a buffer, these emerging risks could test the market's resilience and widen those underlying divergences further in the months ahead.

Global overview

United Kingdom 

Growth remained sluggish, with Q3 data released in December only showing a modest rise in GDP. However, inflation fell more sharply than expected, enabling a December rate cut by the Bank of England. Business sentiment showed tentative signs of improvement following November’s budget, even as longer-term growth forecasts were revised lower.

Europe 

The Eurozone surprised modestly to the upside, with GDP growth up slightly in Q3. The European Central Bank held rates steady during the quarter, balancing weak domestic demand against easing inflation pressures.

United States 

The U.S. economy closed the year in robust shape. Third-quarter GDP growth exceeded expectations, while inflation showed easing in the November data published in December. This allowed the Federal Reserve to cut rates twice in Q4, bolstering investor confidence. Looking ahead, concerns are shifting from recession risk toward potential overheating.

Asia & emerging markets 

Japan was a notable bright spot, with political change fuelling optimism around pro-growth reforms. Chinese exporters remained resilient despite domestic challenges, while emerging markets delivered steady relative performance as global risk appetite improved.

Monthly and long-term performance snapshot

The table below provides a visual snapshot of unhedged index fund investment returns for a selection of assets and regional exposures, both for the month of December and over one and three years, in sterling terms. It highlights the contrast between short-term momentum and longer-term trends. 

Precious metals dominated both the one-month and three-year horizons, while equities delivered solid multi-year gains and bonds and real assets continued to lag. Gold and silver pushed to all-time highs, with silver surpassing $80/oz late in the month, supported by a combination of safe-haven demand, expectations of further rate cuts, and strong industrial fundamentals.

Asset Class Performance – December 2025 (1-Month, 1-Year & 3-Years)

Three Forces Shaping Markets Into Year-End

A soft landing drives risk appetite

Stronger growth and easing inflation created a supportive backdrop for equities into year-end. Markets interpreted rate cuts not as a response to weakness, but as validation that inflation risks were receding.

Falling rates without falling growth remain a powerful combination for risk assets, though tariff pass-through effects loom as a 2026 wildcard.

Precious metals take centre stage

Silver and gold stood out dramatically. Silver surged nearly 28% in December alone, while gold continued its steady ascent. Silver exploded with gains approaching 140+% for the year, including dramatic December surges toward record highs near $70–78+ per ounce, while gold powered to all-time peaks above $4,500 amid relentless central bank buying and safe-haven demand. Inflation hedging, supply constraints, and growing unease around financial excess and geopolitical flashpoints supercharged momentum.

Defensive assets can still outperform in “risk-on” environments when confidence becomes stretched, positioning them as essential diversifiers heading into a more uncertain 2026.

Valuations and volatility return to focus

AI-related equities remained in the spotlight, supported by strong earnings but challenged by growing scepticism. High-profile selling and increased volatility served as reminders that rapid growth narratives are not immune to reassessment.

Strong fundamentals matter, but valuation discipline is reasserting itself amid heightened dispersion.

What stands out for investors

• Broad optimism masked growing performance dispersion.

• Policy support remains constructive, but not uniformly beneficial. Early 2026 tariff escalations and Supreme Court scrutiny could add friction.

• Precious metals continue to play a strategic diversification role amid persistent risks.

• Selectivity is becoming more important as valuations rise and geopolitical headwinds resurface.

In Summary

Heading into 2026, the investment landscape remains supportive but less forgiving. Fiscal stimulus and lower interest rates continue to underpin asset prices, yet pockets of excess are becoming harder to ignore. After a strong year for risk assets, diversification and measured positioning look increasingly prudent, not defensive, but deliberate in a world where geopolitical uncertainties could test the soft-landing narrative further.

Disclaimer: This article is for information and educational purposes only. It expresses my personal views and frameworks for thinking about markets and investing. It does not constitute investment advice or a financial promotion, nor is it a personal recommendation to buy or sell any investment. Everyone’s situation is different, so if you are unsure about a decision, it’s important to seek guidance from a qualified financial professional.

The views, forecasts, and figures included reflect analysis at the time of writing, unless otherwise stated. sources used are believed to be reliable, but markets and circumstances can change quickly, which means our views may also evolve over time.