Global asset markets delivered attractive returns in 2025. Australian and United States' (US) equities both reached record highs during the year, despite periods of volatility and heightened macro uncertainty. Easier financial conditions, resilient corporate earnings and improving confidence supported risk assets across most regions, resulting in strong outcomes across a broad range of asset classes.
In public markets, equities were the standout performers with global shares delivering high-single to double-digit returns supported by interest rate cuts, moderating inflation and continued earnings resilience. Fixed income delivered modest returns as global aggregate bond indices benefited from stabilising yields after several challenging years for bond investors. Commodities also performed well, driven by strength in energy and precious metals, while gold was among the best-performing major asset classes in 2025, rising sharply and reaching new all-time highs amid ongoing geopolitical uncertainty and central bank demand. Listed real estate recorded low-to-mid single-digit gains as interest rates peaked and financing conditions improved. While Bitcoin started the year strongly, heightened volatility and a sharp sell-off later in the year saw prices fall by more than 30% from their peak in October 2025.
Private markets delivered resilient outcomes and continued to demonstrate their diversification benefits within investor portfolios. Private equity returns remained positive but more measured than public markets, reflecting valuation discipline, slower exit activity and a cautious transaction environment. Private credit continued to stand out, generating attractive risk-adjusted returns supported by elevated yields, conservative underwriting and strong investor demand, outperforming many traditional credit benchmarks.
In a year where returns were driven by a broad range of asset classes and the gap between top and bottom performers widened, the importance of portfolio diversification was reinforced. While equities again led returns, investors were rewarded for maintaining exposure to real assets, private market alternatives and income-generating, less correlated strategies which enhanced portfolio resilience.
The year ahead: opportunity-rich amid a mixed backdrop
In 2026, our outlook for global markets remains cautiously constructive. Economic growth is expected to slow rather than stall, supported by a resilient consumer, ongoing investment in technology and infrastructure, and a labour market that is easing but not weakening materially.
Inflation has eased materially from the prior peak, but the final stretch is proving uneven. In Australia, recent outcomes have shown some renewed firmness in both headline and underlying measures, driven less by a broad re-acceleration and more by a handful of categories including housing-related costs, insurance, and parts of services, alongside policy and administrative effects that can temporarily influence the near-term profile. In the US, disinflation has continued, but it remains vulnerable to renewed goods-price pressure where tariffs and supply constraints bite, even as services inflation cools more slowly.
Importantly, neither central bank is boxed in. The Reserve Bank of Australia (RBA) can remain restrictive while staying firmly data-dependent, and the US Federal Reserve likewise retains flexibility, balancing inflation progress against growth and labour-market momentum. If activity softens more than expected, both still have scope to move toward easier settings and if inflation proves stickier, they can afford patience.
Bond yields have backed up from recent lows, though we expect the medium-term bias to be lower as inflation continues to move toward target, albeit unevenly. If growth cools and central banks gain confidence that inflation is on a sustainable path, a steadier and potentially lower, yield backdrop would be supportive for risk assets, particularly equities and select real assets, and for well-structured private credit where underwriting discipline and sourcing remain paramount.
As always, the primary risks lie in the unexpected. Geopolitical tensions, tariff disputes, inflation shocks, and the rapid pace of technological change continue to command investor attention and contribute to heightened volatility. History suggests that investors who look through this noise, rather than react to it, are often best rewarded. The key remains owning high-quality assets capable of withstanding the macroeconomic and geopolitical surprises that tend to emerge without warning.
For Australian investors, the backdrop remains mixed but opportunity-rich. The economy is supported by population growth, a resilient labour market and a stabilising housing sector. Listed real estate, private credit and select alternative assets continue to offer attractive risk-adjusted opportunities, while private equity activity is expected to lift as financing conditions stabilise and valuation expectations align.
Overall, while returns may be more selective than in recent years, 2026 should reward disciplined investors focused on quality assets, valuation and long-term fundamentals rather than short-term narratives.
