The achieved performance was well above the +5.7% target return for 2025. Again, equities performed brilliantly in 2025. Optimism around Artificial Intelligence (AI) opportunities has been a key reason why 2025 was another stellar year for tech stocks, with positive spillovers to the broader equity markets.
2025 started with investors’ expectations for several policy changes from the new US Administration, bracing for some uncertainty and volatility. The pace and magnitude of policy changes, culminating with the “Liberation Day” on April 2, and the announcement of a raft of trade tariffs imposed on all the US trading nations, sent a shock wave through financial markets with the fear of a global trade war. The resulting lack of confidence in US policies immediately impacted traditional safe have assets like US Treasury bonds and the dollar. The strong negative reactions from equities and bond markets in April prompted the US Administration to announce without much delay a temporary 90 days moratorium on the tariffs. During this moratorium, the US Administration was able to negotiate on a bilateral basis a series of trade deals with all its large trading partners, allowing global financial markets to rebound surprisingly quickly. Given geopolitical threats, security risks and uncertainties, European leaders agreed to boost defence expenditures. The new government in Germany agreed to relax its debt ceiling, and to establish two special several hundred billion funds - one dedicated to defence and the other to infrastructure.
The significant pledge to increase public spending in Europe has fuelled concerns about rising debt levels and potential inflationary pressures, leading to a perceptible increase of bond yields across the continent. Political uncertainties in Europe, France in particular, have also exacerbated volatility and higher bond yields during 2025.