“Forest over trees” is not a slogan here, it is a diagnosis. In early 2025, portfolios were built around what felt like the only two stories worth owning, AI and crypto. One had the promise of productivity miracles. The other had the promise of political oxygen and easy money vibes. Add a Trump-flavoured tariff cycle and the trade felt pre packed.
Then 2025 did what markets do when everyone crowds the same entry, and calls it conviction. It delivered a respectable year for consensus winners, and a better year for assets that weren’t supposed to matter.
Big tech did not fail. For instance, the Magnificent Seven proxy MAGS ETF rose 21.2 per cent in 2025. That is a decent outcome, but it was not the kind of return that turns a single basket into the entire portfolio’s identity. In 2024, the MAGS returned 62.7 per cent. That number encouraged a worldview, not just a trade. And, 2025 clipped that worldview back to size.
Crypto was more blunt. Bitcoin, after a 119.5 per cent surge in 2024, fell 5.6 per cent in 2025. Not a collapse, not a triumph, just a reminder that popularity is not a return driver.
Scoreboard check
It was unsettling for anyone who entered 2025 with only two buttons i.e. AI and crypto, on the dashboard. Beyond the common knowledge that gold returned 74.7 per cent (INR) and silver returned 166.7 per cent (INR), there were gains from unexpected corners.
In its best annual performance ever, Euro STOXX Banks basket returned over 80 per cent in CY25. Yes, a clutch of banks Spain (Banco Santander), Italy (Unicredit), France (BNP Paribas), Netherlands (ING), Germany (Deutsche Bank) and Finland (Nordea Bank) shot up, fuelled by resilient growth, high margins, and capital returns.
MSCI Emerging Markets returned 30.6 per cent on the back of appealing valuations, currency movements, and economic growth optimism. The likes of Japan, Hong Kong, Korea beat US stocks, and so did Canadian equities. Marking its best year since 2009, Canada quietly turned into a 2025 winner, up about 28 per cent and logging dozens of record closes after rebounding sharply from the April tariff scare. Mining rode gold, silver and copper, while banks benefited from lower rates and better profits, despite crude weakness.
Beyond precious metals, 2025 had a quieter commodities stampede. Platinum jumped 125 per cent, cobalt 120 per cent, sulphur 116 per cent, rhodium 101 per cent and palladium 83 per cent. The takeaway was breadth, not one hero metal. Scarcity, supply quirks and electrification narratives pulled capital into overlooked corners.
Gain drivers
These are not side characters. Three forces explain why the ignored drawers won. First, the macro tape changed. With Inflation not fully tamed across major regions, policy rates started edging lower, and the dollar stopped being a one-way wrecking ball. The Dollar Index rose 7.1 per cent in 2024, then fell 9.4 per cent in 2025. Trade war too added fuel to this. That shift changes what feels investable. A softer dollar tends to lift non-US equities and emerging markets in global terms, and improves optics for commodities.
Second, breadth returned, and it was measurable. It was not only Europe did well or EM bounced in aggregate. Individual markets had standout years. Korea’s KOSPI was up about 75.7 per cent. Spain’s IBEX rose about 48.2 per cent. In Latin America, Chile climbed about 50.5 per cent. You only need two or three of these numbers, but they prove the point. The rally was not just the same Uncle Sam chart wearing a different flag.
Third, valuation mattered again, in a way that punishes narrative investing. Euro STOXX Banks are the cleanest exhibit. Some of them were considered to be on the brink after Credit Suisse collapsed in 2023! At end 2024, the sector traded at roughly 6.5 times earnings and about 0.7 times book value. That starting point does not require perfection. It requires merely that the world does not fall apart. In 2025, the sector returned 80.8 per cent, and even after that rerating it sits around 10.3 times earnings and roughly 0.8 times book at end 2025.
2026 rules
Where does this leave AI? In the right place, finally. 2025 showed that even real revolutions do not pay investors equally at every entry price and at every level of crowding. The likes of Amazon, Apple, Meta, Tesla and Microsoft under-performed S&P 500.
The 2026 takeaway is a portfolio rule, not a prediction. Do not repeat the 2025 mistake of owning only the loudest theme. For Indian investors, the message stays passive but practical . Domestic equities can remain core, but not all.
2026 global allocation must not be about abandoning India, which will likely again have heavy SIP-driven local flows and an action-packed IPO calendar. Instead, optimal asset allocation should be about refusing to let one geography and one story dictate your portfolio outcome. More importantly, one should be clear that valuation still matters. That’s the message from the European banks to all investors.
Comments
Published on January 3, 2026
READ MORE
