Most investors knew this year would be different given U.S. President Donald Trump’s return to power in the world’s biggest economy, but few predicted how wild the ride would get, or the end results.
World stocks recovered from April’s “Liberation Day” tariffs crash to add another 20 per cent in their sixth year of double-digit gains in the last seven, but look elsewhere and the surprises jump out.
Gold, the ultimate safe port in a storm, is set for its best year since 1979, the U.S. dollar is down nearly 10 per cent, oil off almost 17 per cent, yet the junkiest of junk bonds have soared in the debt markets.
The “Magnificent Seven” U.S. tech giants seem to have lost some of their sparkle since artificial intelligence darling Nvidia (NVDA-Q) became the world’s first US$5-trillion company in October, and bitcoin has suddenly lost a third of its value too.
DoubleLine fund manager Bill Campbell described 2025 as “the year of change and the year of surprises”, with the big moves all “intertwined” in the same seismic issues – the trade war, geopolitics and debt.
“If you were to tell me a priori that Trump was going to come in and use very aggressive trade policies and sequence it the way he has, I would not have expected valuations to be as tight or lofty as they are today,” Campbell said.
A near 60-per-cent boom in European weapons makers’ stocks has been driven by Trump too, following signals he will scale back Europe’s military protection forcing the region – and other NATO members – to rearm.
That’s also helped drive the best year for European bank stocks since 1997, while there’s also been the 70-per-cent leap in South Korean stocks and near-100-per-cent returns on defaulted Venezuelan bonds.
A trio of U.S. rate cuts, Trump’s criticisms of the Federal Reserve and broader debt worries have all impacted bond markets.
Trump’s “big, beautiful” spending plans led the 30-year U.S. Treasury yield to surge past 5.1 per cent to its highest since 2007 in May, and though it is now back at 4.8 per cent, the re-expanding gap to short-term rates that bankers dub “term premia” is causing jitters again.
Japan’s 30-year yields are back near a record high too. The juxtaposition here is bond market volatility is at a four-year low and local-currency emerging market debt has had its best year since 2009.
AI is all part of the debt mix too. Goldman Sachs estimates the big AI “hyperscalers” have spent nearly US$400-billion this year and will spend almost US$530-billion next year.
Gold’s near 70 per cent surge is its biggest jump since 1979 and precious peers silver and platinum are up an even more dazzling 130 per cent.
In crypto, Trump launched a memecoin and gave a presidential pardon to Binance founder Changpeng Zhao. Bitcoin hit an all-time high above US$125,000 in October but then crashed to US$88,000 and will end the year down around 5.5 per cent.
The dollar’s near 10 per cent drop, meanwhile, leaves the euro up 14 per cent, the Swiss franc and Swedish crown 14.5 per cent and 19 per cent higher respectively, while the yen is flat for the year.
Trump’s re-engagement with Russian President Vladimir Putin has helped the rouble surge almost 36 per cent, although it remains heavily restricted by sanctions and just leads the 28 per cent tear from gold producer Ghana’s cedi.
Poland’s zloty, the Czech crown and Hungarian forint are all between 15 per cent and 20 per cent stronger. Taiwan’s dollar jumped 8 per cent in just two days in May, and Mexico’s peso and Brazil’s peso have both shrugged off the trade war drama to score double-digit gains.
“We don’t think this is just a short-term phenomenon,” said Jonny Goulden, head of EM fixed income strategy research at J.P. Morgan. “We think a bear market cycle for EM currencies that has lasted for 14 years now, has turned here.”
Argentina has been another standout. Its markets got hammered when President Javier Milei suffered a thumping regional election defeat in September, but then went wild weeks later when a US$20-billion pledge from Trump helped Milei romp national midterms.
It won’t be a quiet start to next year either.
Trump is already revving up for midterm elections in November and is expected to name his new head of the Federal Reserve shortly, which could be crucial for the central bank’s independence.
Europe and Asia will see how the French, British and Japanese governments – and their bond markets – fare, and whether Prime Minister Viktor Orban can hang on to power in Hungary in April.
Israel will hold elections in the months after, which will keep the fragile Gaza peace in focus, while Colombia and Brazil have crucial elections starting in May and October respectively.
And then there are all of the AI unknowns.
Satori Insights founder Matt King said markets are going into 2026 in a “remarkable” situation in terms of valuations and with leaders like Trump “looking for excuses” to give voters money through stimulus or tax breaks.
“There’s just this ongoing risk that we are pushing the limits of what easy money can do,” King said.
“Already you are starting to see the cracks appearing around the edges, in terms of growth of term premia (in the bond market), in terms of bitcoin suddenly selling off and in terms of the ongoing gold rally.”
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