Ten data points that defined the year
![[Management Team] [Author] Thozet Kevin](https://carmignac.imgix.net/uploads/NextImage/0001/18/%5BManagement-Team%5D-Thozet-Kevi.png?auto=format%2Ccompress&fit=fill&w=3840)
The chart below considers the evolution of a cross-asset portfolio equally invested across European equities, Emerging markets equities, US equities & Technology equities in €, Investment Grade and High Yield credit, Long term bonds, Inflation-Linked Bonds, Gold, Cash in EUR and Cash in USD1 in 2025.
1. €500 BN FISCAL SPENDING PLANNED BY THE GERMAN GOVERNMENT OVER THE NEXT 10 YEARS
Germany’s biggest fiscal pivot in a generation. The relaxing (or reinterpretation) of the so-called “debt brake” will notably allow greater borrowing especially for defense and infrastructure. This move is expected to contribute +0.5% to +1% to GDP per year over the coming decade – a wide range but its success hinges on the implementation of such a structural shift.
2. +12.5% INCREASE IN AVERAGE U.S. TARIFFS RATE – THE HIGHEST IN 90 YEARS
Trump’s favourite word in the dictionary was followed by the activation of Section 232 of the Trade Expansion Act and the Executive Order 14257. This shock led the US economy to muddle through for most of 2025. 2026 will tell us whether levying and redistributing such an import tax can turn the K-shaped economy into a V-shape economy2.
3. THREE IN A ROW, GLOBAL EQUITIES MARKETS ARE SET FOR A RETURN OF MORE THAN 20%, POWERED BY BOTH EARNINGS AND MULTIPLE EXPANSION
Emerging markets (tied to the AI supply chains, Chinese innovation and Latin America), Europe (the revenge of the domestic economy) and Japan (escape from deflation) have all outperformed the US - in both local and USD terms.
4. 10% FALL IN THE US DOLLAR IN TRADE WEIGHTED TERMS – THE SHARPEST SIX MONTHS DECLINE SINCE 1991
The fall was accompanied by wild swings in the S&P 500, which moved within a -15% to +15% range, something seen only four times over the past 50 years. Simultaneously an unlikely correlation emerged with equities, bonds and USD all declining together during “Liberation week”, a curious combination for a major reserve currency issuer. The apparent end of Pax Americana3 as we knew it or the questioning of US exceptionalism contributed to breaking historical patterns.
5. NVIDIA HIT $5 TRILLION MARKET CAPITALIZATION – A FIRST FOR ANY PUBLIC COMPANY
This milestone was achieved as massive AI related capex trickled down the chipmaker’s sales, capable of maintaining margins above 70% thanks to its unique GPU architecture. Other ‘picks and shovels’ providers also gained from this digital gold rush to provide more compute – albeit momentum eased as the cost of capital concerns resurfaced.
6. A +60% PRICE SURGE IN GOLD – IT’S SECOND-BEST CALENDAR YEAR IN ITS 50-YEAR HISTORY
The precious metal has been heavily sought after by institutional investors seeking to diversify reserves given weakening faith in fiat currencies. Global economic uncertainty, geopolitical risks, and expectations of lower policy rates – reducing the opportunity cost of holding the so-called “barbarous relic” - have also supported demand.
7. A 70 BASIS POINTS WIDENING BETWEEN THE US 2-YEAR AND 30-YEAR BOND YIELD – WITH SIMILAR MOVES IN GERMANY AND JAPAN - AS THE YIELD CURVE CONTINUES TO STEEPEN
Long-term maturities have been griding higher across the developed world driven by prospects of fiscal and/or monetary stimulus, elevated deficits, an uncertain inflation outlook and a seemingly never-ending economic cycle. All those factors weighed on investors’ appetite for long-term bonds.
8. 100% OF RETURNS IN CREDIT MARKETS CAME FROM THE CARRY COMPONENT
Credit markets broadly delivered on carry, with relatively low volatility pushing credit spreads back to levels seen prior to both the Russian invasion of Ukraine and hiking cycle lows. On the surface, markets haven’t been this expensive in four years; but dig a little deeper and a growing number of cracks show - in private markets (Tricolor) and among public issuers (Altice and Spirit Airlines defaulted/restructured for the second time in two years). Dispersion is high, bond selection is critical and can potentially be a great source of investment returns.
9. OIL PRICES BROKE THE $60 MARK, THE LOWEST IN THE POST COVID ERA AND AN UNEXPECTED LEVEL ABSENT RECESSIONARY PRESSURE
Such a decline reflects abundant supply (OPEC+ increased production), weakening demand (as global growth softens) and expected appeasement in the Middle East. The bombing of Iran in fact lowered the geopolitical premium. Perhaps counterintuitively, oil reacts less to violence than to disruption risk: as long as flows remain secure, the risk premium evaporates. This is ultimately supportive for consumers as affordability issues remain pressing and supportive of the disinflation trend.
10. FRANCE HAS HAD TWO PRIME MINISTERS IN 2025 - 50% FEWER THAN IN 2024, BUT STILL TOO MANY FOR COMFORT
The French-German 10-year government bond spread widened by 20 basis points before narrowing back toward this year’s lows. Investors’ preference for corporate bonds pushed the yields of some of the largest French companies below that of the French government. And, this year again, French equities underperformed their European peers with the CAC 40 delivering half the returns of the German DAX, two thirds of the Italian FTSE MIB, and one quarter of the Spanish IBEX.
2A K-shaped economy is characterized by some cohorts and/or sectors faring well while others keep struggling, creating a “K-shaped” split. A V-shaped recovery is when the whole economy falls fast but then quickly rises back to normal.
3Pax Americana refers to the period of relative global stability under the United States' hegemonic dominance since the end of World War II, analogous to the Pax Romana during the Roman empire.
