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Market Commentary
Asset Returns
The fourth quarter of 2025 delivered an end-of-year rally in the US stock market, topping off a very strong year, and extending the bull run for a third consecutive year. Lower inflation numbers and the potential for future interest rate cuts have excited investors. We have yet to see technology and AI infrastructure slow down, and it continues to be a major source of investment returns, extending to related industries like power generation and material extraction. In the US, lower expected future interest rates should also help fixed income investments, though we have yet to see major movements in long-term interest rates due to uncertainty surrounding debt load and inflation.
North American equities recovered from early-year struggles that were mostly self-inflicted by US policy. The Nasdaq recorded a return of 2.7% in Q4 (21.2% YTD). The Russell 2000 Index, representing small-cap equities, continued its upward momentum, returning 2.2% for the quarter and 12.8% for the year. The S&P 500, representing large-cap equities, extended its second-quarter rally with a 2.7% gain in Q4 (17.9% YTD). Canada had a very strong year, primarily due to precious metals and the banking sector, up 6.3% in Q4 and 31.7% for the year.
International equities outperformed their North American counterparts during the quarter and year. For quite some time, investors have been patiently waiting for international equity to catch up to US dominance, and 2025 was a major step in that direction. The MSCI EAFE Index (representing Europe, Australasia, and the Far East) posted a YTD return of 32.0%, including a solid 4.9% gain in Q4.
US rate cuts have so far aligned with expectations and have not caused any major shocks to the fixed income market. 2026 brings less certainty as the US Fed has already begun to show a divergence of opinions among members. Long-term rates (10–30 years) remain elevated despite the beginning of the rate-cut cycle due to future inflation and growth uncertainty.
Commodity markets lagged behind equities in 2025. Tariff disruptions were a major factor as many companies stepped back from large projects because they were unable to accurately predict costs. The broad commodity index returned 4.8% in Q4 and 11.1% YTD. In contrast, gold remained a standout performer with a YTD return of 62.5%. Its role as a hedge against uncertainty and inflation was a major reason for the gains. Momentum was a factor for gold in the second half of the year, as volatility increased while investors prepared for the next gold run or correction.
Geopolitical Uncertainty
In recent years, the phrase “unprecedented times” has become a common theme, and 2026 began with another reminder: reports emerged regarding significant political developments in Venezuela. Venezuela, one of the world’s most resource-rich nations, saw its regime nationalize foreign projects under Maduro. The transition of power and US co-management of Venezuelan operations could trigger a supply-side shock in the oil market. This marks a reversal of previous disruptions caused by Russian oil sanctions, which removed heating oil critical to Europe’s energy needs. The evolving situation underscores the volatility of global energy markets and the geopolitical forces shaping them.
Taiwan continues to face an uncertain future shaped by economic growth, technological leadership, and evolving geopolitical dynamics. Its position as a global hub for semiconductor manufacturing underscores its strategic importance in international supply chains. At the same time, cross-strait relations and global diplomatic considerations remain complex, requiring careful navigation to maintain stability. Economic diversification, security measures, and international partnerships will play critical roles in shaping outcomes. While challenges persist, opportunities for innovation and collaboration remain significant, emphasizing the need for balanced approaches that prioritize peace, economic resilience, and constructive engagement within the broader Asia-Pacific region.
A focus on global diversification should help lower the specific risk associated with uncertainty in individual markets while still allowing the benefits of the upside.
Commodities
Commodities experienced notable movements over the past year, with precious metals among the strongest performers. Gold and silver saw significant gains, supported by factors such as inflationary pressures, geopolitical uncertainty, and steady central bank purchases. Silver also benefited from industrial demand linked to renewable energy and electric vehicle production. Broader commodity markets showed mixed trends: energy prices fluctuated as supply disruptions eased, while industrial metals like copper and aluminum were influenced by infrastructure spending and clean-energy initiatives. Overall, 2025 reflected a dynamic environment across commodity sectors, shaped by macroeconomic conditions and shifting global demand patterns.
Outlook and Portfolio Positioning
We expect positive but modest returns for 2026, though outcomes will depend on market conditions, with diversification remaining key as many investors are somewhat nervous due to the extreme gains of the past three years stretching valuations. We expect volatility, especially in individual stocks, to be elevated as investors try to ensure that markets remain efficient and companies justify high valuations.
During Q4 2025, we reviewed our strategic allocations and will implement updates to our discretionary managed private client portfolios during Q1 2026, subject to individual portfolio objectives and mandates. The main change from our historical allocation is a lower allocation to US large-cap equity. Extended valuations and concentration of returns have lowered future expected returns with increased volatility. Through this, we have increased exposure to developed global equity. Further, with increased volatility around the world, our modeling showed a strong preference for diversification of assets.
Important Disclosures and Disclaimers
Allshores manages potential conflicts of interest in accordance with its conflicts of interest policy.
The opinions expressed herein are those of Allshores Wealth Management Company (Bermuda) Limited ("Allshores") as of the date of this report and subject to change without notice. This report is for informational purposes only and does not constitute legal, tax, accounting, or investment advice, including recommendations in respect of any specific securities or investment strategies. Recipients should consult their own professional advisors regarding the suitability of any investment decisions discussed herein. This report does not constitute an offer, invitation, or solicitation to buy or sell any securities or to engage in any investment strategy.
External data has been obtained from sources believed to be reliable, but accuracy, completeness, or timeliness is not guaranteed. To the extent permitted by law, Allshores disclaims all liability for any errors or omissions. Past performance is not indicative of future results. Investment products are not guaranteed and are subject to investment risk, including the potential loss of capital. Past performance is not indicative of future results.
Forward-looking statements involve risks and uncertainties, and actual outcomes may differ materially. This report is confidential and intended solely for the recipient. Unauthorized reproduction or distribution is strictly prohibited.
Macro Indices Report as at December 31, 2025 (%)
| Annualized | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| DEC | NOV | OCT | Q4 2025 | YTD | 2024 | 2023 | 3 Years | 5 Years | |
| Global Equity | |||||||||
| MSCI AC World Total Return | 1.0 | 0.0 | 2.2 | 3.3 | 22.3 | 17.5 | 22.2 | 20.6 | 11.2 |
| MSCI EAFE | 3.0 | 0.6 | 1.2 | 4.9 | 32.0 | 4.4 | 18.9 | 18.0 | 9.6 |
| North America Equity | |||||||||
| S&P 500 Total Return | 0.1 | 0.2 | 2.3 | 2.7 | 17.9 | 25.0 | 26.3 | 23.0 | 14.4 |
| S&P 400 Net TR | 0.0 | 2.0 | -0.5 | 1.5 | 7.0 | 13.4 | 15.8 | 12.0 | 8.6 |
| NASDAQ COMPOSITE | -0.5 | -1.4 | 4.7 | 2.7 | 21.2 | 29.6 | 44.7 | 31.4 | 13.4 |
| RUSSELL 2000 INDEX | -0.6 | 1.0 | 1.8 | 2.2 | 12.8 | 11.5 | 16.9 | 13.7 | 6.1 |
| Europe Equity | |||||||||
| S&P EUROPE 350 INDEX | 2.8 | 1.0 | 2.7 | 6.6 | 20.4 | 9.5 | 16.7 | 15.4 | 12.1 |
| FTSE 100 INDEX | 2.3 | 0.4 | 4.1 | 6.9 | 25.7 | 9.6 | 7.7 | 14.0 | 12.9 |
| Asia Equity | |||||||||
| MSCI AC Far East Ex Japan | 3.2 | -3.7 | 4.5 | 3.9 | 37.2 | 9.6 | 0.4 | 14.7 | 0.7 |
| NIKKEI 225 | 0.3 | -4.1 | 16.6 | 12.1 | 28.6 | 21.3 | 31.0 | 26.9 | 15.1 |
| HANG SENG INDEX | -0.6 | -0.1 | -3.5 | -4.1 | 32.5 | 22.9 | -10.5 | 13.4 | 2.4 |
| SHANGHAI SE COMPOSITE | 2.3 | -1.6 | 2.0 | 2.7 | 21.7 | 16.2 | -1.0 | 11.8 | 5.5 |
| South America & EM Equity | |||||||||
| MSCI EM Net Total Return USD Index | 3.0 | -2.4 | 4.2 | 4.7 | 33.6 | 7.5 | 9.8 | 16.4 | 4.2 |
| Fixed Income | |||||||||
| ICE BoA 1-3 Year US Treasury Index | 0.3 | 0.5 | 0.3 | 1.1 | 5.1 | 4.1 | 4.3 | 4.5 | 1.8 |
| Bloomberg US Agg | -0.1 | 0.6 | 0.6 | 1.1 | 7.3 | 1.3 | 5.5 | 4.7 | -0.4 |
| Bloomberg Multiverse (Unhedged) | 0.3 | 0.3 | -0.2 | 0.3 | 8.4 | -1.3 | 6.0 | 4.3 | -1.9 |
| Citi World BIG US Hedged | -0.2 | 0.3 | 0.8 | 0.9 | 5.1 | 2.6 | 6.9 | 4.8 | -0.3 |
| ICE BoA US High Yield Index | 0.7 | 0.5 | 0.2 | 1.3 | 8.5 | 8.2 | 13.5 | 10.0 | 4.5 |
| Commodities | |||||||||
| BLOOMBERG Commodity Index | -0.7 | 2.9 | 2.6 | 4.8 | 11.1 | 0.1 | -12.6 | -0.9 | 7.0 |
| GOLD | 2.4 | 5.9 | 3.5 | 12.2 | 62.5 | 26.6 | 12.8 | 32.4 | 17.1 |
| OIL (WTI) | -1.3 | -3.6 | -1.2 | -5.9 | -7.6 | 14.4 | -3.8 | 0.6 | 16.0 |
12 Month Market Review – as at Decemeber 31, 2025
2025 was a very strong year, with positive returns across all major financial markets. With those strong returns came a lot of volatility, and people that only view their portfolio once a quarter may have a much different perspective of this year than daily market watchers.
Equity markets slowed down a bit in Q4 from the high pace achieved in the preceding two quarters. Equities returned positive throughout Europe and the Americas for the quarter and year. Fixed income investors and investors with dry powder should pay attention as the US Fed rate-cut cycle has begun, and lower-risk investments such as CDs and money market funds may start to lose attractiveness relative to higher risk assets.