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Global stock markets mostly retreated on Wednesday in thin end-of-year trading, rounding off a remarkable year marked by record highs, easing interest rates and a technology-led rally driven by artificial intelligence.
London’s benchmark FTSE 100 closed down 0.1 per cent on a shortened trading day, a day after hitting a fresh record close near the 10,000-point mark. Despite the modest pullback, the index surged more than 21 per cent in 2025, its strongest annual performance in 16 years.
The rally was fuelled largely by interest-rate cuts from the Bank of England and the US Federal Reserve, following sustained declines in inflation. Similar trends played out across global markets, with most major indices posting double-digit gains over the year.
Outlook for 2026
Analysts say further upside in 2026 will depend heavily on continued monetary easing in the United States.
“To push meaningfully higher in 2026, equities will need confirmation that the Fed can deliver at least the two rate cuts still priced by the market, with growth unimpeded,” said Stephen Innes of SPI Asset Management.
Minutes from the Federal Reserve’s December policy meeting, released on Tuesday, showed most officials believe further rate cuts would be appropriate if inflation continues to cool as expected.
Tech and AI Drive Gains, but Valuation Worries Linger
The Fed’s monetary easing in the second half of the year, combined with massive investment in artificial intelligence, played a central role in boosting global equities. However, concerns about stretched valuations in AI-related stocks weighed on sentiment toward the end of 2025.
AI chip giant Nvidia became the world’s first $5 trillion company in October, though its market value has since eased to around $4.5 trillion.
Commodities and Crypto: Mixed Fortunes
- Gold, viewed as a safe-haven asset, hit multiple record highs in 2025, supported by a weaker dollar and economic uncertainty linked to President Donald Trump’s tariff policies.
- Oil prices fell nearly 20 per cent over the year, weighed down by oversupply concerns.
- Bitcoin, highlighting the volatility of the cryptocurrency market, surged to a record above $126,000 in October before sliding to around $88,000 by year-end.
- Silver prices edged lower on Wednesday after reaching record highs earlier in December.
Global Market Performance
On Wednesday:
- Paris closed down 0.2 per cent.
- Hong Kong ended the year with a near 1 per cent loss on the day, though the Hang Seng Index gained 28 per cent over the year.
Markets that closed earlier in the week posted strong annual gains:
- Tokyo’s Nikkei 225: up over 26 per cent
- Seoul: surged 75 per cent
- Frankfurt: climbed 23 per cent
- Paris: gained more than 10 per cent
On Wall Street, which held a half-day session on Wednesday, major indices were on track for double-digit annual gains, with the Nasdaq Composite up over 21 per cent for the year.
Meanwhile, the MSCI All Country World Index, which tracks major global companies, recorded an annual gain of approximately 21 per cent, underscoring the broad strength of global equities in 2025.
