Who made money in 2025?

Who made money in 2025?

2025 was a good year for equity investors. After a sell-off on President Donald Trump’s announcement of tariffs in April, global equities returned 22% last year, notching up their third consecutive year of double-digit gains. An investor who bought the global market in late 2019 would have achieved a return of 89% over the last six years.

• Investors are used to US equities doing well. But last year they underperformed the rest of the world for only the fourth time in the last 15 years, with the US returning 17% against a return of 29% from the rest of the world. This marks a break with the post-pandemic story of significant US outperformance. How can we explain this reversal of fortune?

• In the wake of the pandemic the ‘magnificent seven’ tech stocks (NVIDIA, Meta, Alphabet, Tesla, Microsoft, Amazon and Apple) shot ahead of the broad US and global equity markets. Since then worries about tech valuations and uncertainties about returns to AI investment have grown while some investors have shifted away from tech stocks. Last year five of the magnificent seven underperformed the broad market.

• This is not to say the tech story is dead. Within the magnificent seven Alphabet (owner of Google) and Nvidia saw strong gains. Alphabet’s AI models dominate a popular online performance leaderboard and Nvidia has benefitted from strong demand for its AI chips. Some of the best-performing stocks are smaller tech companies, including Western Digital, Micron Technologies and Seagate Technologies, which make the memory and computer storage needed to build data centres. Sandisk, another player in the sector, has risen almost tenfold in value since spinning out of Western Digital last February 2025.

• Euro area equities did well, yielding 39%, led by a strong performance from so-called peripheral Europe - Greece, Spain, Italy and Ireland.

• Emerging market performance of 17.4% was dragged down by weakness in the largest equity market, India, which returned 8%, but bolstered by a 36% rise in the Chinese market.

• The best performing sector globally was mining companies specialising in precious metals. The best-performing stock in the UK FTSE 100 last year was Fresnillo, which mines silver and gold in Mexico and delivered returns of 468%. The price of silver and gold has risen, buoyed by concerns about levels of government debt and inflation.

• Defence and aerospace stocks have continued to benefit from geopolitical uncertainty and rising levels of defence spending, with the global sector yielding 54% last year. UK defence contractor Babcock returned 150% and aerospace giant Rolls-Royce yielded 105%.

• Bank shares underperformed from the financial crisis, in 2007 until late 2023, since when they have soared in value, especially in Europe. Last year banks globally returned 43%, buoyed by strong profits and low default rates. In September of last year, after a strong two-year rally, the Datastream global bank index finally broke through the peak it last reached on the eve of the financial crisis in May 2007.

• And the underperformers in this rising market? Retail, leisure and consumer products companies have tended to underperform against a backdrop of lacklustre consumer demand and rising tariffs.

• House price inflation has lagged returns on equities across the US, the euro area and the UK last year. Figures from Halifax show UK house prices rising just 0.3% in the year to December. More granular official data pointing to mid-single digit price growth in the Northeast and Northern Ireland in the year to October, but with  London house prices down 2.4%. Central London has been hard hit, with prices in the City of London, Westminster and Kensington and Chelsea down 16%-18% in the year to October. Housing isn’t the investment it once was. UK house prices have risen 5.5% in the last three years compared to inflation of 10% and a return on the FTSE 100 of 49%.

• Two more exotic asset classes have also struggled. The Liv-ex Fine Wine 1000 index is down 4.5% over the past year, its third year of decline, while classic car prices rose by 1.3%.

• Despite myriad risks and uncertainties 2025 delivered bumper returns for equity investors. The macro picture was mixed, but sector-specific factors propelled many stocks higher.  A rising tide, however, did not lift all boats. 20 of the FTSE 100 delivered negative returns last year. More generally, it is worth noting that share prices can fall and languish for very long periods leaving index performance dependent on a handful of high performers. Last month, The Economist cited research by Hendrik Bessembinder of Arizona State University that between 1925 and 2023 most listed US firms delivered negative returns. Remarkably, less than 3% of stocks accounted for all the increase in shareholder wealth over this period.

OUR REVIEW OF LAST WEEK’S NEWS
The UK FTSE 100 equity index ended the week up 1.1% at 10,235. The index hit a record high on Thursday following a stronger-than-expected UK GDP reading.

Economics

• US president Donald Trump announced a new tariff of 10% on all goods imported into the US from the UK, Denmark, Norway, Sweden, France, Germany and the Netherlands “until such time as a Deal is reached for the Complete and Total purchase of Greenland [sic]”. The tariffs will take effect from 1 February and will rise to 25% on 1 June
• The leaders of the affected countries issued a joint statement criticising the move and saying that they “stand in full solidarity with the Kingdom of Denmark and the people of Greenland”
• EU leaders are considering imposing retaliatory tariffs or blocking American companies from accessing the single market in response to the move. Talks between Mr Trump and European leaders are expected this week
• The US announced that countries “doing business” with Iran would face US tariffs of 25%. The move was criticised by China, Iran’s biggest trading partner
• The price of a barrel of oil briefly rose above $66/barrel last week before falling back as statements from the White House shifted from threatening imminent attack in Iran to saying they would “watch and see what the process is”
• The US and Taiwan agreed a trade deal that will see tariffs on most goods moving to the US cut from 20% to 15% in return for $250bn in investment in the US semiconductor industry
• US inflation was unchanged at 2.7% in the 12 months to December, providing some relief to investors who were concerned that the fall seen the previous month was a result of data distortions from the government shutdown
• US retail sales grew 0.6% from the previous month in November, rebounding from a fall of 0.1% in October
• US Federal Reserve chair Jay Powell said that he was under investigation by the US Department of Justice over renovations of the Federal Reserve buildings. Mr Powell added that he believed the investigation was a result of his refusal to cut interest rates despite pressure from US president Donald Trump
• Shipping giant Maersk announced it would resume navigation through the Suez Canal and Red Sea “following improved stability”, easing strains on global trade
• The UK economy grew by a better-than-expected 0.3% in November as manufacturing output was boosted by Jaguar Land Rover resuming production following a cyber attack
• The German economy posted growth of 0.2% in 2025, the first annual growth since 2022, despite a fall in exports, as consumer and government spending grew
• China posted a record $1.2tn trade surplus in 2025 as a 20% fall in exports to the US was more than offset by an increase in exports to the EU, Southeast Asia and Africa
• The EU and the Mercosur trading bloc (Argentina, Bolivia, Brazil, Paraguay and Uruguay) signed a landmark free-trade agreement after over 25 years of negotiation. The European Commission promised over €45bn in support for its farmers to ease the passage of the deal

Business

• An analysis published by the UK’s Office for Students showed that despite the proportion of students achieving an upper second class or higher degree falling for a third consecutive year in 2023-24, there is still considerable evidence of ‘grade inflation’ since 2010-11
• US president Donald Trump called for big technology companies to “pay their own way” to prevent rising electricity costs as a result of demand from data centres
• Aircraft manufacturer Boeing secured more orders in 2025 than its European competitor Airbus for the first time since 2018. Boeing’s orders for 2025 from overseas include a number that were announced as part of US trade deals
• The UK government announced upgrades to rail links across the north of England including a new line between Liverpool and Manchester and later a line between Birmingham and Manchester in its “Northern Powerhouse Rail” strategy
• X announced it would block its AI Grok tool from creating explicit images of real people in countries where it is illegal following a widespread outcry. UK regulator Ofcom said it would investigate if any laws had been broken

Global and political developments

• Thousands of people are reported to have been killed in Iran as authorities cracked down on widespread protests. Mr Trump vowed “very strong action” if protestors were executed and later claimed he had it on good authority that the killings had stopped
• The US evacuated personnel from some of its bases in the region
• The EU is considering creating a ‘membership-lite’ option to allow Ukraine to quickly join the EU as part of any peace deal with Russia, the FT reports
• Former Conservative leadership candidate Robert Jenrick announced he was joining Reform UK after being sacked from the shadow cabinet for “plotting in secret to defect”
• Conservative MP Andrew Rosindell announced he was defecting to Reform UK
• Venezuelan opposition leader María Corina Machado presented Donald Trump with the Nobel Peace Prize medal she was awarded last year. Mr Trump has previously said that Ms Machado lacks the support to lead Venezuela
• The US began sales of Venezuelan crude oil with a transaction worth $500m, CNN reports. The US has previously said it will control oil sales “indefinitely”
• Japanese prime minister Sanae Takaichi announced snap elections will take place next month as she seeks a new mandate to pursue policies including fiscal stimulus and higher defence spending

And finally… police in Utah were forced to explain why their AI-powered report-writing software had documented that an officer had transformed into a frog. The error was believed to have arisen after the software analysed body-cam footage that contained the audio from the film, ‘The Princess and the Frog’ – Kermitting a crime