Macroeconomic conditions became increasingly supportive as the year progressed. Central banks shifted decisively toward monetary easing over the course of 2025, with the US Federal Reserve cutting rates three times while the European Central Bank and the Bank of England also loosened policy.
A major bout of market volatility followed US tariff announcements in April. However, equities recovered rapidly as tariff exemptions widened and bilateral negotiations eased trade tensions. As the year concluded, the global rally broadened meaningfully, reflecting improving macroeconomic stability and reduced tariff anxiety.
Earnings growth proved robust across major markets, powered largely by the ongoing artificial intelligence investment cycle. This structural tailwind lifted semiconductors, cloud infrastructure providers, power equipment manufacturers and digital platforms. The US market was again strong with the S&P 500 returning 16% for the year, driven primarily by the Technology, Communication Services, and Industrials sectors.
In Europe, the STOXX Europe 600 delivered a full year return of 17%, benefiting from increased fiscal spending in Germany, attractive valuations, improving business sentiment, and softer inflation. A firmer euro provided an additional boost for US dollar-based investors.
The Financials and Resources sectors were among the region’s strongest performers, while defence-related stocks also significantly outperformed the broader market.
Japan’s equity markets reached record highs, fuelled by substantial foreign inflows, corporate governance reforms and strong performance from export-oriented firms benefiting from a weak yen for much of the year. The TOPIX index recorded one of the strongest global performances with a full year gain of approximately 22%. Although expectations of Bank of Japan policy tightening created some late year volatility, Japanese equities closed the year near historic highs, sustained by robust earnings and ongoing policy support.
In emerging markets, China’s onshore A-share market continued to build on its 2024 recovery with strong gains in 2025, underpinned by state support.
In addition to liquidity injections by the Chinese central bank, state-backed institutional funds also stepped in to buy equities. The CSI 300 ended the year up almost 18%.
Conversely, while India’s macroeconomic resilience and long-term growth prospects remained strong, it lagged major global markets for most of the year as valuations cooled, foreign flows moderated, and earnings growth softened. However, sentiment improved late in the year following indications of easing trade tensions. The Nifty 50 returned approximately 10% for the year.
Different factors led market performance in different regions. Globally, Momentum was the strongest theme for much of the year, as stocks that had already risen continued to climb. However, outside the US, investors favoured Value and Quality stocks. Europe’s gains, for example, were largely driven by cyclical value stocks and stable, income-producing sectors rather than high-growth technology.
Geopolitical tensions exerted a major influence on asset prices throughout 2025. Broader global fragmentation—including sanctions, tariffs, and supply chain shifts—injected volatility and maintained a persistent geopolitical risk premium embedded in commodities and select equity sectors. Despite these headwinds, global markets ended 2025 with robust gains overall, anchored by earnings resilience, monetary easing, and sustained demand for technology-led growth themes.
Against this backdrop, ADIA’s Equities Department (EQD) continued to increase allocations to systematic managers and extension strategies with higher turnover, seeking to enhance overall risk-adjusted returns while carefully managing aggregate exposures to control risks. EQD also expanded its roster of managers in China to fully capture the opportunity set in a market demonstrating strong alpha potential.
Furthermore, the Department helped ADIA diversify its sources of return by scaling up market-neutral and total return strategies. These efforts required carefully selecting specialist managers capable of generating consistent returns with limited correlation to broader equity market movements.
