2025: Markets Proved Their Mettle

If 2025 taught markets anything, it’s this: resilience mattered more than perfect conditions.

Investors faced a rare mix of political dysfunction, aggressive trade policy and diverging monetary paths. Despite all that, risk assets pushed higher. Equity markets climbed a familiar wall of worry, supported by easier global financial conditions, concentrated earnings growth and a sharp repricing of real assets tied to geopolitical risk. 

Markets didn’t get safer, they got smarter, pricing in uncertainty as a baseline. 

Even a 43 day US government shutdown late in the year and an escalating global trade war failed to derail markets. Pullbacks from policy shifts, military tensions or diplomatic breakdowns were usually short lived. US tariffs of up to 145% were quickly brushed off. Liquidity stayed plentiful, balance sheets remained solid and investors trusted that central banks would step in if growth came under real threat.

For Australian investors, one theme stood out above the rest: policy divergence.

While most global central banks shifted clearly towards easing, the Reserve Bank of Australia (“RBA”) held its ground. That gap shaped markets all year, influencing currencies, sector leadership and investment outcomes.

Macro and Policy Highlights

Globally, 2025 marked the end of the “higher for longer” era, at least in the Northern Hemisphere. In the US, moderating inflation and a cooling labour market allowed the Fed to cut rates by 0.75% in the second half of the year. By December, unemployment rose to 4.4%, giving markets confidence inflation was easing.

Australia charted its own path. After modest cuts earlier in the year, the RBA held the cash rate steady at 3.60% from August onwards. Sticky services inflation and firm wage growth kept pressure on policymakers. By year end, Australia stood out as the last major developed market still running clearly restrictive policy settings.

That split had two key effects. It helped steady the Australian dollar near US$0.67. It also shaped equity leadership, favouring cash flow positive, resource-linked sectors over growth businesses reliant on falling rates.

Geopolitics: A Constant Backdrop

Political risk in 2025 wasn’t a one-off shock. It became part of the background.

The US government shutdown highlighted ongoing fiscal fragility, while aggressive tariff policy reshaped trade flows and supply chains. Rather than triggering systemic stress, these forces accelerated trends already in motion, including reshoring, near-shoring and strategic investment in critical materials.

Tensions in the Middle East and Asia added to the picture, boosting demand for energy, defence and precious metals. Markets increasingly treated geopolitical risk as something to price in, not something to dismiss.

Equity Markets: Winners and Losers

Global equities rose but the gains were far from evenly shared. The S&P 500 gained 18%, led by a handful of large technology and AI exposed companies. Earnings growth was highly concentrated with a small group doing most of the heavy lifting. Falling bond yields and confidence in long term AI adoption allowed valuations to stretch further.

Australian equities rose 10.3% with the resource sector doing the heavy lifting. Gold surged over 50% supported by geopolitical risk, central-bank demand and fiscal uncertainty. Iron ore and energy stocks benefited from strong cash flows and steady demand. 

Higher rates explained the rest of the story. Banks provided steady income but little excitement as credit growth slowed and household pressure lingered. Healthcare and technology were hit hard, down 23.7% and 20.1% respectively. Consumer sectors felt the squeeze as spending stayed cautious. 

Fixed Income, Currency and Commodities

US and European yields fell across the curve delivering positive returns and restoring diversification benefits that had been missing for years. Australian fixed income lagged its global peers. The RBA’s stance capped yield declines, but income remained attractive and rate volatility eased as expectations stabilised in the second half of the year.

Currency markets reflected policy divergence more than growth differences. The Australian dollar held up better than many expected, supported by strong commodity prices and Australia’s relative yield advantage. The US dollar softened as rate cut expectations grew, but it continued to attract demand during bouts of geopolitical stress.

Commodities remained central to China’s structural influence throughout 2025. Iron ore defied softer forecasts on steady Chinese steel needs and Australian export resilience. Gold led the charge, with the main drivers among others being driven by central bank purchases and de-dollarization flows amid US tariff escalations. Silver delivered gains that even outpaced gold’s rally, propelled by industrial demand relating to solar, AI infrastructure, and safe-haven buying. Copper also rallied fueled by supply deficits, AI-related electrification, and green energy transitions.

Looking Ahead to 2026

China will remain a structural driver, focused on stability, self-sufficiency and strategic resilience.

Key themes for investors:

1. Australian Policy Risk – If inflation doesn’t ease, RBA tightening could weigh on equities, especially consumer and leveraged sectors.
2. Broadening Equity Leadership – AI remains important, but returns are increasingly shifting to energy security, defence, electrification and supply-chain resilience. Critical minerals will play a central role.
3. Quality and Resilience Matter – Elevated US valuations leave markets sensitive to geopolitical shocks. Low-leverage, cash-generative businesses with pricing power are better positioned.

Bottom Line

2025 showed markets can absorb shocks when liquidity and earnings hold up. In 2026, returns will be harder won, volatility more event-driven, and leadership tied to assets and businesses that underpin energy security, supply-chain stability and strategic resilience.

Superhero Markets Pty Ltd (ABN 36 633 254 261) is a Corporate Authorised Representative (CAR 1276309) of Superhero Securities Limited (ABN 96 160 456 315) (AFSL 430150). 

Please read and understand our Financial Services Guides, Terms & Conditions, Privacy Policy and Website Terms of Use at superhero.com.au/support/documents, before deciding to use or invest on Superhero. We do not provide financial advice that takes into consideration your personal objectives, financial situation or particular needs. All investments carry risk, so please consider carefully before making any investment decisions and seek independent financial advice. Past performance is not indicative of future performance. Pictures, charts and graphs are provided for illustrative purposes only.

Copyright © 2026 Superhero