Global markets ended the fourth quarter of 2025 on a constructive note, extending gains from earlier in the year as easing inflation, resilient economic growth, and clearer monetary-policy trajectories supported risk assets. Investor sentiment improved steadily as confidence grew that the peak in global interest rates had passed and that major central banks were positioning for gradual easing during 2026. This optimism was underpinned by the IMF’s revised outlook, which suggested a soft landing was becoming the base-case scenario for most developed economies. Corporate earnings remained broadly supportive, particularly in the financial and industrial sectors, while volatility stayed contained despite pockets of geopolitical uncertainty in the Middle East and ongoing trade rhetoric. Against this backdrop, global equities delivered solid returns; the MSCI World Index advanced 3.1% over the quarter to finish the year up 21.1%. Emerging markets once again outperformed developed peers, led by strength in Asia and a late-quarter rally in Latin America. The MSCI Emerging Markets Index gained 4.7% in the fourth quarter, bringing its total return for 2025 to an impressive 33.6%.
In the United States, economic momentum remained firm into year-end, defying earlier recessionary fears. Real GDP expanded at an annualised 4.3% in the third quarter, comfortably above trend and driven by robust consumer spending and continued strength in business investment. The labor market showed signs of cooling without cracking, a balance that allowed the Federal Reserve to pivot. Inflation continued to moderate, with headline CPI at 2.7% year-on-year in December, though services inflation remained somewhat sticky due to wage growth. In a widely anticipated move, the Federal Reserve delivered a 25-basis-point rate cut in December, lowering the federal-funds target range to 3.50%–3.75%. Chair Jerome Powell emphasised a data-dependent path ahead, noting that while the restrictive era was ending, the pace of future cuts would be measured. Equity performance was more subdued than the high-octane growth seen in Q3 as investors rotated away from high-growth technology stocks into value and cyclical sectors. Nevertheless, U.S. markets closed 2025 strongly: the S&P 500 Index rose 2.7% in Q4 to end the year up 17.9%, the Nasdaq Composite Index gained 21.1% for the year, and the Dow Jones Industrial Average advanced 14.3% as industrial activity picked up.
European markets advanced during the quarter as political stability improved following a turbulent summer and disinflation trends remained intact. Eurozone inflation held close to the ECB’s target, printing 2.1% in December, while growth remained uneven across member states. Economic data were mixed: manufacturing activity still faced pressure—particularly in Germany’s automotive and chemical sectors—but services activity and consumer spending showed signs of stabilisation as real wage growth turned positive. The Euro Stoxx 600 Index responded positively, rising 2.8% in December and ending the year up 19.8%. France’s CAC 40 and Germany’s DAX also posted gains as the late-September trade accords with the U.S. began to manifest in improved export orders. The ECB held rates steady in December but signalled that the easing cycle would likely resume in early 2026 if energy prices remained stable.
In the United Kingdom, equities rounded off a strong year despite a challenging domestic growth backdrop and high debt-servicing costs. Inflation eased to 3.2% in November, although it remained above the Bank of England’s target. The BoE delivered a 25-basis-point rate cut in the final quarter, citing a more balanced risk outlook while cautioning that future decisions would remain finely balanced. Falling gilt yields supported rate-sensitive sectors such as homebuilders and utilities. The FTSE All-Share Index rose 25.8% for the year in US dollar terms, supported in part by sterling weakness, positioning it among the stronger-performing developed equity markets in 2025. The FTSE 100 specifically benefitted from its heavy weighting in healthcare and energy, with the latter rebounding slightly toward the end of December.
Japanese equities continued to benefit from structural reform momentum, improving corporate governance, and strong external demand. Supported by a weaker yen for much of the quarter and solid exporter earnings, the Nikkei 225 Index gained 12.6% over the quarter. However, the monetary environment shifted in December when the Bank of Japan raised its policy rate by 25 basis points to 0.75%, its highest level in decades. The BoJ reiterated that policy normalisation would proceed gradually in light of still-fragile domestic demand, but the move signalled a definitive end to the era of negative or zero rates.
Chinese equities delivered standout gains in Q4 despite ongoing domestic headwinds in the property sector. The Hang Seng Index rose 12.1% and the MSCI All China Index advanced 14.8% over the period as optimism surrounding semiconductor self-sufficiency and AI development reignited investor interest. While GDP growth remained a concern, the People’s Bank of China maintained a supportive stance, ensuring liquidity remained ample. Performance was bolstered by sustained demand for high-tech manufacturing, which helped offset the drag from weak consumer confidence.
Global fixed-income markets posted modest positive returns during the quarter as bond yields stabilised following the volatility of the third quarter. The Bloomberg Global Aggregate Bond Index rose 0.2% over Q4 and 8.2% for the year, supported by the global shift toward policy easing. Credit markets remained well bid, with investment-grade and high-yield spreads near multi-year lows, reflecting low default expectations. In the commodities space, markets were mixed: oil prices declined further as supply outpaced demand forecasts, while gold surged to record levels, ending the year sharply higher as investors sought protection against fiscal uncertainty and elevated geopolitical risk.
Local Market: South Africa
South African markets delivered an exceptional finish to 2025, reinforcing the country’s position as one of the strongest global equity performers for the year. The FTSE/JSE All Share Index rose 8.1% over the quarter and finished the year up 42.4% in total return terms. This performance was driven primarily by a powerful combination of SA Inc recovery and the sustained rally in resources. Financial shares rebounded sharply in Q4, with the Financial 15 Index advancing 18.9% as declining bond yields and improving business confidence supported bank and insurer valuations. Resources rose 10.3% during the quarter; while this was a moderation from the 50% surge in Q3, the sector ended the year up a staggering 144.2%, fuelled by elevated precious-metal prices. Industrials declined 2.0% in Q4, weighed down by rand strength which dampened the earnings of heavyweights like Richemont and Naspers, while listed property delivered a robust 16.3% as lower yields provided a meaningful valuation tailwind.
Economic conditions continued to show broad-based improvement. GDP expanded by 0.5% quarter-on-quarter in Q3 2025 and 2.1% year-on-year, marking the fastest pace of annual growth since 2022. This momentum was supported by mining, agriculture, and financial services. Crucially, the energy supply remained stable, which allowed for a recovery in manufacturing and retail activity during the festive season.
Inflation remained well contained, providing the South African Reserve Bank (SARB) with significant breathing room. Headline CPI eased to 3.5% in November, sitting comfortably at the midpoint of the target range. Core inflation remained benign at 3.1%. Against this backdrop, the SARB maintained a supportive policy stance, keeping the repo rate unchanged at 7.0% but signalling that the next move would likely be a cut, provided inflation expectations remain anchored near 4.5%.
Local bond markets delivered outstanding returns as declining inflation and improved fiscal sentiment—boosted by better-than-expected tax collection from the mining sector—drove yields lower. The FTSE/JSE All Bond Index (ALBI) ended the year up 24.2%, significantly outperforming global bond peers. The 10-year government bond yield declined to around 8.4% by December, down from over 10% earlier in the year. Inflation-linked bonds also posted positive returns, benefiting from strong demand for real yield in a declining rate environment.
The rand was a notable outperformer, appreciating sharply over the quarter to end 2025 at approximately R16.6/USD. This represents a significant recovery from the R19.0/USD levels seen in previous years. The stronger currency helped contain imported inflation, particularly fuel prices, which provided a tailwind for consumer disposable income. While the currency strength weighed modestly on export competitiveness, the overall impact on national sentiment was overwhelmingly positive.
Overall, the fourth quarter capped an outstanding year for South African assets. With inflation near target, bond yields at multi-year lows, and global financial conditions turning more accommodative.
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