Market Insights December 15, 2025

Federal reserve: what now?

As we anticipated, the US Federal Reserve lowered its benchmark interest rate by 0.25% last week. Just two weeks ago, markets had all but ruled out such a move, assigning barely a 30% probability to further monetary easing by the Fed. This decision is welcome and should help spur accelerate the US economy in 2026. It is also expected to help contain the current deterioration in the labour market. However, dissent within the committee persists, and positions are becoming increasingly polarized. On one side, there are proponents of a far more aggressive easing and on the other, conservatives who consider maintaining the status quo preferable. This division may fuel uncertainty regarding the continuation of the current rate-cutting path over the coming quarters. Nevertheless, we believe that the overall tone set by Jerome Powell and his successor, whose identity will be revealed in January, should remain broadly accommodative. This should be sufficient to support US risk assets, whose valuations, it is worth recalling, are near historic highs.

2025: Resilient markets amid political uncertainty

The year 2025 will be remembered as a paradox for financial markets. While the international political environment proved particularly unstable, marked by ongoing trade tensions, major electoral events, and an increasing fragmentation of diplomatic balances, financial assets nonetheless delivered remarkable performances overall. Investors, far from retreating into caution, favoured risk assets, buoyed by stronger-than-expected economic prospects and a broadly accommodative monetary policy stance.

Equity markets were the main driver of performance. In the United States, the broad index rose by approximately 16% over the year, supported by strong economic growth, resilient consumer spending, and sustained momentum in technology and artificial intelligence-related sectors. In Europe, the upside surprise was even more pronounced, with the general index climbing nearly 18%, despite occasional political tensions and moderate economic growth. The outlook was bolstered by gradual disinflation and the beginning of monetary easing, which supported valuations.

Switzerland was no exception. The SMI rose by around 12%, underpinned by the defensive nature of its large-cap stocks, robust balance sheets, and the ongoing appeal of Swiss stability to international investors. In Asia, market performance was particularly impressive: Japan stood out with a gain of around 26%, benefiting from corporate governance reforms, renewed foreign investor interest, and a still-accommodative monetary policy. Other stock exchanges, such as those in Hong Kong and Seoul, recorded even more significant advances.

Bond markets remained in the shadow of equities, posting much more modest returns. Gold, by contrast, continued its upward trajectory, reaffirming its role as a safe-haven asset amid geopolitical uncertainty and growing concerns about public debt sustainability, further reinforced by substantial purchases from certain central banks. In Switzerland, listed real estate funds delivered strong performances, supported by interest rate stabilization, attractive yields, and sustained demand for high-quality real assets.

The main downside for European investors came from the foreign exchange market. The US dollar experienced a sharp decline in 2025, penalising the currency return of USD-denominated investments. This weakness of the greenback reflected both expectations of monetary easing in the US and persistent fiscal deficits.

This week’s figure: $1 trillion

Represents China’s trade surplus in goods since the beginning of the year, driven by a robust 5.9% year-on-year growth in exports in November. This record level comes despite US tariffs having led to a contraction of more than 20% in exports to the United States.