Weekly Buzz: 2025 in review, 2026 in view

It's been quite a year. Markets hit record highs even as trade tensions, bubble fears, and geopolitics gave investors pause. Here's a look back at what happened, and forward to what might come next.

Looking back on 2025

Investors sent markets to all-time highs this year. International stocks took the spotlight after President Trump's Liberation Day tariffs rattled confidence in US assets. European equities have gained over 17%, driven by attractive valuations and bigger government spending on defence and infrastructure. Even so, the S&P 500 has delivered roughly 16% returns for 2025. Historically, moments of market volatility have turned out to be the most profitable entry points over the long run.

China staged a comeback of its own. DeepSeek's AI breakthrough in January reignited global interest in Chinese technology and pushed the Hang Seng Tech Index to a three-year high, challenging the narrative that the US held a monopoly on AI innovation.

Despite the strong showing in equities, investors couldn't quite shake their concerns about trade tensions and broader geopolitics. So, along with many central banks, they added gold as a safe-haven asset to their portfolios. That led to stellar returns: gold has seen gains of about 60% for the year.

Throughout it all, AI remained a major theme. Despite concerns over an AI bubble, today's AI leaders are backed by real revenues and cash flow – a far cry from the dot-com era, when companies traded at 67 times earnings with little to show for it.

Looking forward to 2026

Earnings growth is a key driver of long-term stock returns, so let's start there. Goldman Sachs provides an encouraging set of figures: S&P 500 companies should see earnings grow by around 12% next year, Asia (excluding Japan) by 16%, Japan by 9%, and Europe by 5%. AI will play a big part. In the best case, firms keep investing, adoption accelerates, and productivity gains continue to spread throughout industries. In the worst case, spending slows and returns disappoint.

Besides AI, surprises could stem from geopolitics, or shifts in interest rates. Traders expect the Federal Reserve to make two cuts in 2026, but if the US president appoints a new central bank chair who shares his preference for lower rates and more aggressive easing, cuts may come faster than expected.

What’s the takeaway here?

As 2025 draws to a close, it's worth pausing to appreciate how far we've come. Trade tensions flared, geopolitical risks loomed, and bubble fears swirled, yet investors who stayed the course were rewarded.

This year also marked the end of an era with Warren Buffett's retirement. His principles, however, aren't retiring with him. "Time is the friend of the wonderful company," he famously said. Deutsche Bank's recent 200-year study backs him up: over any 25-year period, the probability of stocks losing money was just 0.8%. So as we look ahead to 2026, the path forward is familiar. Stay diversified. Stay invested. The headlines will change, but the fundamentals of building wealth won't.

(General Investing is built on these same principles: diversified across regions and asset classes, and designed to work across market cycles, so you can stay invested through whatever the new year brings.)

Simply Finance: Compounding

Compounding is what happens when your investment returns generate their own returns. A 10% gain on $1,000 gives you $1,100. The next 10% gain is on $1,100, giving you $1,210. Over time, this snowball effect accelerates. It's why Buffett called time "the friend of the wonderful company" – and why time in the market, not timing the market, works over the long term.