As we step into 2026, it’s worth reflecting on the year that just passed. 2025 was full of geopolitical and policy uncertainties, yet markets delivered one of the strongest performances in recent history. We asked our portfolio managers what surprised them the most in 2025, and what they expect in 2026.
Dharmo Soejanto,
Chief Investment Strategist, UOBAM Invest
What surprised you most about 2025?
It was surprising how well all asset classes performed in 2025 in the face of geopolitical and policy uncertainties.
Despite the tariff war turmoil in April, the layoffs of government employees by the Department of Government Efficiency (DOGE), and US deportation policies targeting non-registered immigrants – factors that should have weighed heavily on the global economy and financial markets – returns stayed remarkably strong.
Global equities, as measured by the MSCI All Country World Index, rose more than 20 percent in USD terms, making 2025 one of the best years for stocks. Even the US, which was one of the weakest major markets and a huge source of investor anxiety, delivered an above-average 16 percent return.
Bond markets also exceeded expectations, with global and Asian benchmarks posting gains of around 8 percent, well above their typical mid-single-digit returns. Gold was the standout performer, soaring about 65 percent in 2025.
In short, investors who stayed invested were rewarded with significantly higher-than-expected returns across most asset classes.
What could surprise investors in 2026?
After three consecutive years of ~20 percent returns in equity markets, investors are understandably anxious, especially with regards to stock valuations in the Artificial Intelligence (AI) and Information Technology (IT) sectors.
Yet, 2026 could pleasantly surprise investors in delivering another strong year for equities. Several factors could drive this upside.
In the US, fiscal stimulus is expected through income tax cuts for individuals and capital expenditure tax credits for corporates. The monetary stimulus tap has also been turned on; the US Federal Reserve (Fed) started cutting rates in September after a nine-month pause and is expected to implement two to three more cuts in 2026. Additionally, hosting the football World Cup could boost consumption and tourism, reinforcing a robust US economy.
The fiscal stimulus narrative extends across other major economies: Europe is ramping up defense and infrastructure spending, Japan is offering consumer subsidies, and China is widening its budget deficit. Together, these measures point to a reacceleration of global growth from 2025 into 2026.
However, the flip side is the potential resurgence of inflation, especially in the US, where fiscal and monetary easing coincide with low unemployment and shrinking labor supply due to immigration policies. Moreover, companies may begin to pass on costs arising from the tariffs in 2025 to consumers after absorbing them initially. If inflation picks up, bond yields could rise, limiting the Fed’s ability to cut rates further. This scenario would weigh on the bond market and deliver lower-than-average returns for fixed income investors.
Joyce Tan,
Head of Fixed Income Asia/Singapore
What surprised you most about 2025?
2025 was an exceptional year for Asian credit markets. The J.P. Morgan Asia Credit Index (JACI) delivered an impressive 7.9 percent total return as of November – its best performance since 2019 and the third consecutive year of solid gains. This outcome exceeded expectations, especially given initial concerns over potential disruptions from Trump 2.0 policies.
While risks did surface on Liberation Day, the market shock was short-lived as sentiment rebounded quickly when the US government rolled back or scaled down tariffs. What stood out was also the stark contrast in approach: China displayed strategic and disciplined defiance, while the US tariff strategy appeared fragmented and poorly coordinated. Ultimately, investors saw through the noise, recognising that these threats lacked real bite – allowing market confidence to return.
What could surprise investors in 2026?
Surprises in 2026 may come from reversals of today’s assumptions.
Credit spreads are near historical lows, leaving little room for error. Any sector-specific upheaval or unforeseen ripple effects – such as disrupted refinancing cycles or unexpected regulatory changes – could trigger valuation corrections, particularly in areas where investors are heavily concentrated.
Another potential surprise lies in the path of monetary policy. The market has a poor track record of predicting the US Federal Reserve’s moves, and while consensus expects further rate cuts, inflationary pressures may prove stickier than anticipated. Structural trends like offshoring and friend-shoring continue to push costs higher. Meanwhile, the permanent shift toward green energy will sustain heavy investment in renewables, keeping production costs elevated as companies juggle social and environmental goals with profitability.
Paul Ho,
Group Head of Asia Ex-Japan Equities
What surprised you most about 2025?
The resilience of the US market despite significant structural challenges was surprising. In 2025, the US stared down a mounting fiscal deficit and rising long-term yields, ongoing tariff disputes, concerns over rare earth supply controls, and the possible unwinding of the yen carry trade as long-term JGB yields hit new highs.
What could surprise investors in 2026?
Inflation in 2026 could be significantly higher than most investors expect. Many are underestimating the US government’s determination to keep the economy running hot. With fiscal stimulus measures such as tax cuts and infrastructure spending, combined with accommodative monetary policy, demand is likely to remain strong. Structural factors – like elevated costs from friend-shoring and the ongoing transition to green energy – will further add to price pressures.
If inflation proves stickier than anticipated, it could limit the Federal Reserve’s ability to continue cutting rates, potentially reshaping market expectations and asset valuations. This scenario would surprise investors who are currently positioned for an environment of easy monetary policy.
All information in this publication is based upon certain assumptions and analysis of information available as at the date of the publication and reflects prevailing conditions and UOB Asset Management Ltd (“UOBAM”)'s views as of such date, all of which are subject to change at any time without notice. Although care has been taken to ensure the accuracy of information contained in this publication, UOBAM makes no representation or warranty of any kind, express, implied or statutory, and shall not be responsible or liable for the accuracy or completeness of the information.
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