At the beginning of 2026, as we bid farewell to the old and welcome the new year, let’s take a look back at the global stock markets of 2025. Despite factors such as tariffs, geopolitical tensions, Federal Reserve interest rate cuts, and concerns about the AI bubble, the US stock market continued its upward trend throughout 2025. Looking ahead to 2026, analysts express optimistic hopes but also mention various challenges and potential risks.
In 2025, the global stock markets rebounded from the drastic plunge triggered by the US-China trade war on “Liberation Day” in April. The markets saw a 21% increase, marking the sixth year of double-digit growth in the past seven years. The S&P 500 index initially dropped by 19% but later experienced a significant rebound, setting 39 new highs throughout the year with a rise of over 16%.
However, surprises lurked in other areas. Gold, as a safe-haven asset, had its best year since the 1979 oil crisis, with prices surging nearly 65%. The US dollar depreciated by almost 10%, while oil prices fell by nearly 18%. Surprisingly, the junk bond market saw a significant increase.
Since Nvidia became the first company globally to reach a market capitalization of $5 trillion in October, the shine seemed to wane on the US “Big Seven” tech stocks and Bitcoin suffered a sudden one-third drop.
DoubleLine fund manager Bill Campbell described 2025 as a “year of change and surprises.” He stated that all major developments intertwined around three significant issues – trade wars, geopolitics, and debt.
European arms manufacturers’ stocks surged by 56%, driven by US policies urging European and other NATO member countries to boost their military expenditure.
European bank stocks also achieved their best performance since 1997. South Korea’s stock market rose by 75%, while Venezuela’s defaulted bonds saw returns of nearly 100%. Silver and platinum had astonishing gains, rising by 145% and 125% respectively.
The US interest rate cuts, Trump’s criticism of the Fed, and broader debt concerns all impacted the bond market. The 30-year US Treasury bond yield surged to over 5.1% in May, reaching its highest level since 2007. Although it has since dropped to 4.8%, the widening spread between long-term rates and short-term rates – known as the “term premium” – has reignited market concerns.
Japan’s 30-year government bond yield also reached historic highs. In contrast, global bond market volatility hit a four-year low, while emerging market bonds denominated in local currencies recorded their best year since 2009.
AI also played a part in debt composition as related companies needed loans for investment. Goldman Sachs estimated that large-scale AI companies invested nearly $400 billion in 2025, with projections of investing close to $530 billion in 2026.
The depreciation of the US dollar led to a nearly 14% rise in the Euro in 2025, with the Swiss Franc up by 14.5%. The Chinese yuan broke through 7 against the US dollar, while the yen remained stable after a heavy hit in December.
The US-Russia re-engagement helped the ruble soar by 40%. Despite being severely constrained by sanctions, the ruble’s increase was outpaced by Ghana’s currency, the cedi, with a 41% surge, becoming the best performing currency.
The Polish zloty, Czech crown, and Hungarian forint all rose by 15% to 21%. The Taiwanese dollar surged 8% in just two days in May, while the Mexican peso and Brazilian real both achieved double-digit growth, overcoming the impacts of trade wars.
“We believe this is not just a short-term phenomenon,” said Jonny Goulden, head of research at Morgan Stanley’s emerging market fixed income strategy, to Reuters. “We believe the 14-year bear market cycle for emerging market currencies has come to an end.”
Argentina, another notable case, saw President Javier Milei’s defeat in regional elections in September impacting the local market. However, a few weeks later, the US pledged $20 billion in aid, leading to Milei’s landslide victory in the midterm elections and a market skyrocket.
In the cryptocurrency realm, Trump issued a meme coin and pardoned Binance founder Zhao Changpeng. Bitcoin hit a historic high in October, surpassing $125,000, only to plummet to below $88,000 later, with an expected year-end drop of over 6%.
After three consecutive years of impressive gains, Wall Street generally foresees a continued positive trend in the stock market for 2026, but risks and challenges still loom.
Adam Turnquist, chief technical strategist at LPL Financial, stated that when the S&P 500 index rises by at least 15% in a year, the following year’s average return is around 8%. He pointed out that during these years, the S&P 500 index typically experiences a 14% decline before rebounding and continuing to rise. This indicates that stock market growth is not always smooth sailing.
Expectations of further interest rate cuts by the Fed in 2026 and strong corporate earnings in the US will continue to support the stock market’s robust prospects. “This year’s momentum suggests that the bull market is strong and unstoppable,” said Hardika Singh, an economic strategist at Fundstrat, to CNN. “And there is almost no compelling reason to believe that this momentum will not continue into next year.”
Morgan Stanley analysts noted in a report that the US is likely to remain a global growth engine driven by a robust economy and AI-led super cycle, which will lead to record capital expenditure and rapid profit growth.
However, Wall Street analysts also point out uncertainties surrounding Trump’s choice for Fed chair, ongoing geopolitical tensions, and tariff issues that may potentially hinder the stock market after the recent strong surge.
Singh stated, “Stock prices are high, and talk of an AI bubble is normal, but that doesn’t worry me because company earnings are still growing steadily.” He added, “The economy remains resilient, and concerns seem premature until we see signs of slowdown among high-income groups.”
Yet, uncertainties still abound in the global economic outlook, with market risks emerging constantly.
Geopolitical concerns top the list. Gold recently had its best year since 1979 as investors seek safe-haven assets, reflecting worries about potential economic or market issues.
In recent months, the stock market rose on optimism about Fed rate cuts. The path could become complicated for Fed rate cuts if inflation remains high in the new year, potentially causing trouble for the stock market. Meanwhile, Americans relying on wage income are feeling the economic conditions are rather dire. The ability of the labor market to remain stable will be key in assessing consumer spending health and its potential impact on corporate profits.
Investors will also be monitoring the Chinese economy. Israeli elections set for the end of October will bring focus to the Gaza ceasefire agreement. Ending the conflict in Ukraine remains a hot topic, Hungary will have elections in April, while Colombia and Brazil will hold crucial elections in May and October respectively.
Furthermore, there are unknown factors surrounding AI.
Matt King, founder of Satori Insights, stated that the market is entering 2026 with an “unusual” valuation condition. “We are constantly challenging the limits of loose monetary policy, and that risk always exists,” King said. “You’re beginning to see some signs such as the growth in term premium in bond markets, Bitcoin’s sudden plunge, and gold’s continuous rise.”
(Partial reference to Reuters report)