Shareholders around the world have enjoyed another stellar year. Stockmarkets in America, Europe, India and Japan are set to finish 2025 at or near all-time highs, with some closing in on a third consecutive year of double-digit gains. Part of this reflects investors’ growing optimism about the profit-making potential of artificial intelligence. Animal spirits, however, have also surged more broadly. Companies in Asia’s emerging markets have never had to pay bondholders such low premiums to borrow; investment-grade American firms have not paid so little since the 1990s.
Such headline figures, however, understate how turbulent the year has been for market participants. In April the global financial system teetered on the edge of crisis after Donald Trump’s “Liberation Day” tariffs threatened to upend world trade. And over the course of the year, several longstanding trends snapped or went into reverse. Here are the five most consequential market developments of 2025.
Shaken faith in Uncle Sam
In early April America briefly began to trade like a crisis-prone emerging market. After Mr Trump unveiled swingeing, nonsensically calculated tariffs on the rest of the world, share prices plunged. Investors feared for the safety of government bonds and sold those as well. As bond prices fell, yields rose, which in theory should have supported the dollar. Instead, rattled traders dumped the currency.
Panic abated once Mr Trump responded, cancelling or postponing most of his tariffs. Investors concluded that the White House was not quite as free-wheeling as they had feared, and that markets could still impose discipline. Treasuries and the greenback stabilised, and America’s stockmarket resumed its long climb. Yet faith in Uncle Sam has not been entirely restored. The dollar has barely recovered from its plunge (see chart 1) and foreign investors are now far keener to hedge their exposure to it. And during the next crisis they are unlikely to forget the experience of watching Treasuries fail, however briefly, as a haven.
Stockmarket laggards and leaders swapped places
American stocks began the year as the envy of the world. Their prices rose by 26% in 2023 and 23% in 2024, compared with 14% and 2%, respectively, for shares listed in other developed markets. This year has snapped that winning streak (see chart 2), despite America’s position at the heart of the AI boom.
A weaker dollar explains some of the shift, though not all of it. Europe’s bourses have shone, boosted by Germany’s plans to stimulate its economy and by rising defence spending across the continent. And within Europe another reversal has taken place: the stockmarkets in former “peripheral” countries have outpaced those of the “core”. Standout performers in 2025 include Greece, Italy, Spain and Poland. Once-troubled banks have done especially well.
Meanwhile, shares listed in emerging markets have outperformed those in developed markets for the first time in years: msci’s indices for each have risen by 27% and 19%, respectively. South Korea’s kospi index has soared by nearly 70%. America’s stockmarket may attract the most attention, but this year the real action has been elsewhere.
Interest rates fell; bond yields not so much
For the most part 2025 has been a year of increasingly doveish monetary policy among the world’s major central banks. America’s Federal Reserve has cut interest rates three times, by 0.25 percentage points each time, as has the Bank of England. The European Central Bank and the Bank of Canada have each opted for four cuts. The outlier has been the Bank of Japan, which raised short-term borrowing costs twice—albeit from the ultra-low starting point of 0.25%.
Yet it is longer-term bond yields that determine the borrowing costs for much mortgage, government and corporate debt, and these have fallen by far less, or risen outright. Yields on ten-year American Treasuries are down by only 0.4 percentage points, and those on British “gilts” by less than 0.1. Germany’s ten-year borrowing cost, at 2.9%, is 0.5 percentage points higher than at the start of 2025. Japan’s has risen to 2%, its highest level since 1999.
Some have begun to call this the “debasement trade”. They fear that central bankers are cutting rates too soon and that governments are borrowing unsustainably. Both raise the risk that inflation will surge again, eroding the real value of currencies and sovereign debt. Bondholders are therefore demanding higher long-term yields as compensation. If consumer price increases accelerate next year, expect the debasement trade to be all the rage.
Bitcoin is not digital gold
Until recently, bitcoin might have been touted as another debasement trade. The cryptocurrency has a capped supply and is beyond the reach of central bankers, so it cannot be devalued as “fiat” currencies can. Those features spurred hopes that bitcoin might become digital gold, offering a hedge against inflation and government profligacy.
Investors, it turns out, prefer the real thing. Since the start of 2025 the price of gold has risen by over 60%. Bitcoin, by contrast, is down by 7%, and suffered a peak-to-trough plunge of over 30% in October and November. Rather than looking for digital alternatives to the yellow metal, investors have turned to more traditional substitutes. Silver has done even better than gold (see chart 3), more than doubling in value this year.
If bitcoin is not digital gold, what is it? It is often described as a proxy for global risk appetite or investors’ techno-optimism. Indeed, bitcoin’s sharp drop late in the year coincided with falls in Nvidia’s share price and those of tech firms more broadly. Over the course of the year, however, these stocks have far outperformed the cryptocurrency. Bitcoin’s faithful adherents may need a more convincing story if they are not to lose even more.
Private markets are becoming less fashionable
After seeing assets under management balloon during the 2010s, private-investment firms are now growing more slowly. According to PitchBook, a data provider, they raised some $900bn of fresh capital in the first three quarters of 2025. If that rate were to be sustained to the end of the year, it would mark the fourth consecutive decline in private-capital fundraising since a peak in 2021.
Fundraising has slowed in part because it has become harder to buy and sell privately owned companies. Such transactions tend to rely on debt, which is far more expensive to service now than in 2021. In the first half of this year geopolitical uncertainty, not least about tariffs and global trade, kept plenty of deals on ice. Though things have started to thaw, private-markets firms that were forced to delay selling the companies they own have returned less capital to their investors—who, in turn, have become more reluctant to write new cheques.
It is therefore no surprise that private-markets firms are scrambling to “democratise” their industry, courting individual investors alongside their traditional institutional clients. Whether individuals should be eager to hand over their money, when institutional investors increasingly are not, is another matter.
