Top 10 Market Themes for 2025: Year-end Review

Posted by Helena Eaton on 1st December 2025

At the beginning of the year, we published our Top 10 Market Themes for 2025, which reflected our macro and sector views for the next 12 months. Here our Head of Investment Advisory, Helena Eaton shares a review of how the themes have performed during the year, in a rapidly changing political, geostrategic, financial and economic environment.

Theme 1. US growth exceptionalism to continue–and dollar strength to persist

The US economy has remained resilient this year, outperforming its developed market peers. So far Donald Trump’s tariff manoeuvres have not led to a major negative impact on macroeconomic data in the US; a softening labour market has raised some concerns, but consumer spending is resilient, inflation is under control, and growth has accelerated into year-end underscored by massive investment in AI infrastructure. The Fed has also been supportive by delivering two 25 bps rates cuts in September and October, with another cut on the cards for December 2025. Growth is picking up in Japan and Europe due to large fiscal impulses, but the US is still expected to continue outperforming.

However, our call for a stronger US dollar has not materialised. We saw significant dollar weakness in the first half of the year caused by lower business and investor confidence in the US’ economic policy and increased economic uncertainty.  The US Dollar Index (DXY) remained rangebound during the second half of 2025 and is down 8% year-to-date. This year the weaker dollar was one of the main detractors of performance for foreign investors in the US assets, which prompted discussions about hedging FX exposure by many asset managers.  We are fairly neutral on the US dollar in relation to the main developed market currencies on a short-term horizon as, even though the dollar has already given up a lot of ground this year, concerns about the US’ fiscal deficit and the Fed’s independence could persist.  However, we should see dollar strength to resume in the medium-term, driven by positive rate differentials, stronger US growth versus the rest of the world, and the lack of a viable alternative to the USD as the world’s reserve currency.

Mixed outcome: US economy outperformed, but USD weakened

Theme 2. Heightened volatility is expected after two strong years for equities

The year has indeed brought heightened volatility, especially in the wake of Donald Trump’s ‘Liberation Day’ tariff announcement. The VIX Index (or CBOE Volatility Index – a measure of equity market volatility) in April crossed above 50 for the first time since the onset of the coronavirus pandemic in 2020. The sharp market moves were magnified by forced selling due to margin calls and forced buying to cover short positions. (Indeed, the volatility has extended beyond equities, with powerful moves in currency and bond markets; the MOVE Index of US Treasury market volatility also hit a two-year high.)

Additionally, we have seen elevated average volatility in the fourth quarter of 2025 as the VIX Index has been fluctuating around 20 with several spikes towards 30. This reflects investors’ nervousness about stretched equities valuations, in particular the AI-related stocks. Beyond the recent volatility we have seen sector rotation from cyclical to more defensive sectors, with the US healthcare and utilities being up the most since mid-September. This year’s volatility and rotation across sectors and geographies has again demonstrated the importance of maintaining diversified portfolios – including exposures across equity factors (notably Growth, Quality and Value), sectors (including defensives, not just US large-cap tech) and geographies. Portfolio hedges such as quality fixed income, gold, and certain types of structured products which perform well during market downturns have proved to be good diversifiers. We also used the heightened volatility and market pullback to trade structured products with attractive payout terms.

Aligned with expectations: we saw higher volatility in equities, although the returns year-to-date are good

Theme 3. Look beyond US large-caps

At the start of the year, we suggested diversifying beyond US large caps, in particular into US SMID-caps and Japanese equities. This theme largely played out in terms of geographic diversification, as this year we observed well-pronounced geographic rotation in equities. In the beginning of the year European equities outperformed driven by expectations of fiscal stimulus in the EU and weaker US dollar.  Since mid-April US equities had a strong rebound driven mainly by AI names. In the second half of the year the emerging markets rallied due to the positive effect of the weaker dollar and low valuations. Japanese equity market went up significantly driven by investors’ optimism after election of the new PM. However, US SMID cap stocks have lagged this year given the concentrated rally in large cap technology stocks. The valuations of smaller US firms remain cheap and this asset class should benefit from the Fed rate cuts, which will lower the cost of borrowing. Year-to-date we have seen strong performance in all equity markets with Japanese and emerging markets equities up around +26%, US technology stocks up +19%, US large cap and European equities up +15%¹. US small caps have been lagging for most of the year and finally started playing catch up due to the positive impact of lower US rates with +10% growth year-to-date.

Mixed outcome: US SMID did not outperform US large cap

Theme 4. AI trend to advance, supporting the linked robotics theme

The AI theme continued to dominate market headlines this year, although with some volatility caused by concerns regarding stretched valuations, rapidly growing capital expenditures (CAPEX) of hyperscalers, increased use of debt to fund these investments, and the circular nature of several high-profile AI-linked deals. The main AI-related stocks demonstrated good performance: the traditional AI leader Nvidia is up +32% year-to-date, however it has been overtaken by Alphabet, which is up +70% for the same period.  The PHLX Semiconductor Index of US chip stocks is also up +34% year-to-date.

We believe that AI is a long-term trend, which will continue playing an important role across markets and industries. The attention of investors will be gradually shifting towards monetisation of AI products and their impact on corporate productivity, which is likely to broaden the investment universe for the AI theme beyond AI infrastructure stocks.

Aligned with expectations

Theme 5. Electrification will be at the centre of real economy investment

Increased electricity demand from AI-driven data-centres and energy transition goals continue driving demand for upgrading electricity generating infrastructure as well as focus on diversification into other available sources of energy generation, such as nuclear. This year this theme performed well, the Global X U.S. Electrification index which tracks performance of US companies involved in conventional electricity, alternative electricity and grid infrastructure is up +23% year-to-date. The MVIS Global Uranium and Nuclear Energy index, which tracks performance of companies active in the uranium and nuclear energy sector is up +53% year-to-date.

We believe that electrification is a longer-term theme, which will require investments in upgrading electricity generating infrastructure and diversification in other sources of energy, including nuclear to meet the forecast increase in electricity consumption.

Aligned with expectations

Theme 6. Defence investment is rising

This theme continues to play out, which is reflected in rising shares of GDP being committed to defence spending, in particular in European countries, as well as NATO leaders agreeing to increase target defence spending from 2% to 5% of GDP (with 3.5% spent on core defence activities and 1.5% on defence-related activities and sectors like infrastructure). These additional spending plans have been drawn up both to appease the Trump administration, which has sought to pivot US assets and attention to the Pacific theatre, and to reinforce Europe’s military and security structures, supported by Germany’s transformational commitment to build the continent’s most powerful conventional military. The STOXX Europe Aerospace and Defence Index has risen +50% year-to-date as investors are recognising the changing geopolitical landscape where power is playing a greater role in international affairs.   

Aligned with expectations

Theme 7. M&A dealmaking to pick up

At the beginning of the year, we expected that the Trump administration’s deregulation policies would clear the path for larger mergers and acquisitions (M&A) deal flow. However, the M&A market experienced turbulence in the beginning of the year caused by tariff uncertainty, but has started to show signs of recovery since. In the first nine months of 2025 total deal value rose 10% compared to the same period last year, according to BCG. While this theme has not played out quite as expected yet, we should see M&A activity continue to pick up as trade policy uncertainty fades and lower US interest rates – which reduce the cost of borrowing to finance acquisition deals – are supportive.

Not realised yet but could improve next year

Theme 8. A slow rate cutting cycle – especially in the US – sustains fixed income’s appeal

At the beginning of the year we expected that central bank’s rate-cutting path will be relatively slow and the risk-free rate component of fixed income returns would remain comparatively high, keeping yields attractive. We also suggested that investors should prioritise carry income over price appreciation and remain selective in credit. This call was right as policy rates have come down gradually and fixed income returns have been solid, while spreads ended the year approximately at the same levels as at the start of the year, in spite of significant volatility during the year.

The Bloomberg Global Aggregate Bond Index hedged to USD is up +5% year-to-date and Global Aggregate Corporate Index hedged to USD is up +7% year-to-date demonstrating investment grade bonds’ value to diversified portfolios during the recent market turbulence. Given credit spreads remain very tight, we continue to emphasise the importance of selectivity when investing in corporate credit. We continue to favour high-quality issuers and see targeted opportunities in certain high-yield and crossover segments.

Aligned with expectations

Theme 9. Gold’s appeal has not dulled – while cryptocurrencies will be an alternative for some

At the beginning of the year we forecast that 2025 will be a strong year for gold. This theme has played out well with gold being up over 50% YTD and almost reaching the level of $4400/oz in October. Gold has experienced a pullback since then, but we consider this a healthy correction after an exceptional run. Looking forward, we continue to believe that the drivers behind gold’s rally are still in place, such as strong demand from central banks, increased ETF inflows driven by Fed rate cuts, and gold’s long-term role as store of value.

In contrast, Bitcoin has experienced significant correction in October, which resulted in underperformance compared to gold and other traditional asset classes, including US Treasury bonds. Bitcoin is down 8.5% year-to-date. This has sparked a debate about Bitcoin’s role as a store of value and also serves as a reminder for some investors to diversify their portfolio across asset classes and keep the portfolio in line with their risk tolerance level.

Aligned with expectations: gold rallied, and bitcoin experienced volatility

Theme 10. Global economies are diverging

At the beginning of the year, we expected that growth, inflation, and monetary policy regimes would continue to diverge across global economies, creating opportunities for investment strategies that look to trade around macroeconomic trends. This has certainly been the case, with Trump’s aggressive shift in US trade policy introducing an unexpected variable into the mix that has amplified regional differences. This led to a very strong year for discretionary macro hedge funds, with the HFRI Macro: Discretionary Thematic Index being up +15% as of the end of October.  However, it has been a more challenging year for trend-based strategies, which are under water over the same period as abrupt policy shifts and aggressive market swings prevented any substantial trends from being established.

Aligned with expectations

We expect to publish our Top Market Themes for 2026 in early February 2026. In the meantime, we wish you a productive end of the year and an enjoyable festive season.

References

¹The performance is in local currency apart from the emerging markets index performance, which is measured in USD.

---

Important Legal Information

The content of this document has been prepared by Bedrock S.A., Bedrock Monaco SAM, and Bedrock Asset Management (UK) Ltd. (jointly, hereafter, “Bedrock”). The information and opinions contained in this document are for background information and discussion purposes only and do not purport to be full or complete. No information in this document should be construed as providing financial, investment, legal, tax, or other professional advice. The information contained herein is intended for the sole use of the recipient and may not be copied or otherwise distributed or published without the express consent of Bedrock. Although the information contained herein has been established by Bedrock based on or by reference to sources, documents and systems it believes to be reliable and accurate, Bedrock does not guarantee its accuracy or completeness and assumes no responsibility for any losses that may arise from the use of this information. Information included in this document is intended for those investors who meet the definition of Professional Client under the Swiss FinSA regulation as well as Professional Client or Eligible Counterparty under the UK Financial Conduct Authority.

The value of all investments and the income derived therefrom can fluctuate due to market movements and you may not get back the amount originally invested. In the case of overseas investments, values may vary as a result of changes in currency exchange rates. This may be due, in part, to exchange rate fluctuations in investments that have an exposure to currencies other than the base currency of the portfolio. Past performance is no guide to or guarantee of future performance.

Bedrock expressly disclaims liability for errors or omissions in the information and data contained in this document. No representation or warranty of any kind, implied, expressed or statutory, is given in conjunction with the information and data. Bedrock accepts no liability for any loss or damage arising out of the use or misuse of or reliance on the information provided including, without limitation, any loss of profits or any other damage, direct or consequential. You agree to indemnify and hold harm less Bedrock and its affiliates, and the directors and employees of Bedrock and its affiliates from and against any and all liabilities, claims, damages, losses or expenses, including legal fees and expenses arising out of your access to or use of the information in this presentation, save to the extent that such losses may not be excluded pursuant to applicable law or regulation. Any opinions contained in this presentation may be changed after issue at any time without notice. Certain statements included within constitute ‘forward-looking statements.’ These statements, which may include words like ‘believes,’ ‘expects,’ or similar expressions, are subject to numerous risks and uncertainties. Actual results may differ materially.