The Year That Was: Markets Bet On Hope Over Expectation!

Описание: As we enter 2026, and Happy New Year to all, we should reflect on the fact that while hope is a desire for a positive outcome with uncertainty about its arrival, that represents a wish for the "most desirable," outcome; expectation is a strong belief or probability assessment that something will happen, trusting the result and often implying control even when it does not exist. Markets remain in the hope camp, despite signs which may question that optimism.

All up the world’s main stock benchmarks had a turbulent year, repeatedly hitting record peaks and then pulling back as worries over tariffs, interest rates and a possible AI bubble whipsawed markets. Still markets gained height in 2025, with the MSCI All World index up a significant 20.82% over the past year, while the STOXX 600 in Europe rose 16.08%.

On Wall Street, the S&P 500 was up 16.65% for the year, though posted a fourth-straight daily loss on Wednesday, supported by bullish bets on the AI-linked stocks. The NASDAQ rose 20.54% for the year, though slide a little this week, while the DOW, which also fell, was up just 13.38% for 2025, with lower exposure to IT. So much of the momentum can be sheeted toward tech and AI stocks, with the iShares Semiconductor ETF (NASDAQ:SOXX) ending the year with a nearly 40% gain. NVIDA the mother of the AI boom rose 34.84% over the 12 months, while Alphabet was up a massive 65.23%. Microsoft made 15.54%, Apple 11.49% and Meta a mere 10.15%. So not all tech is equal.

Beyond Tech, the broader sector weakness on Wednesday came amid light trading volumes, with many investors already on the sidelines ahead of the holiday, while U.S. bond closed early on Wednesday.

For the year though US banks were strong, with Citigroup up 66.84% for the year and Goldman Sachs up 52.88, benefitting from the market volatility and lending growth. Its still hard to read the state of the US economy, after the data freeze stemming from the shutdown, but the Labor Department said on Wednesday that weekly initial jobless claims dropped by 16,000 to a seasonally adjusted 199,000, the lowest in a month, and below the 220,000 estimate of economists.

Having weathered a year of tariff wars, the longest government shutdown in U.S. history, and roiling geopolitical strife, Bond Yields have tended to rise, in the light of higher inflation. Investor sentiment on stocks was also soured by the Federal Reserve’s December policy meeting minutes, released on Tuesday, which revealed deep divisions among policymakers over the path of interest rates in 2026.

While India’s Nifty 50 achieved a 8.09% annual gain. Australia’s S&P/ASX 200 only achieved 6.26%, which I think underscores the questions about the performance of the Australian Economy, and its leadertship. New Zealand in comparison though only achieved a 3.35% 12 month rise.

The Australian rise was its smallest annual gain since 2022 when the market fell, as high company valuations and the growing prospect of interest rate hikes contained the upside compared with the double-digit returns for major international peers.

Standing back, we expect 2026 to be another volatile year, and we start with set of overvalued stocks, questions about the sustainability of the massive AI investments, and a gap between this tech story and the rest of the markets. As I said, hope over expectation.

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