Written by Alfredo Piacentini, Managing Partner of DECALIA
As we draw up the 2025 year-end assessment, index performances closed in positive territory. Yet for investors and portfolio managers, the year has been anything but smooth sailing. It has been marked by heightened geopolitical tensions and economic challenges, with equity markets experiencing both an unusually high concentration of performance and episodes of sharp sector rotation.
Will the landscape change in 2026?
It would be impossible to conclude the year without addressing artificial intelligence (AI), or rather, the market’s enthusiasm for stocks associated with this theme. Nvidia, emblematic of the sector, has gained around 30% since the beginning of the year and, with a market capitalisation exceeding USD 4.2 trillion, has overtaken Apple and Microsoft in terms of weight within the S&P 500. Approximately 15% of the S&P 500’s performance in 2025 (up 16% at the time of writing) is directly attributable to Nvidia alone. As for Palantir, combining exposure to AI with the defense sector, another strong performer this year, its share price has surged by 140%.
Then DeepSeek Arrived
This impressive run has not been without turbulence. Between mid-February and early April, the AI theme and with it the broader US equity market, heavily dominated by technology giants, experienced a sharp correction, with Nvidia and Palantir falling by 30–40%. The catalyst was the emergence of a Chinese competitor, DeepSeek, which entered the AI market with a model presented as significantly cheaper to develop while remaining technologically robust.
More recently, since early November, doubts have emerged regarding the future profitability of the massive investments currently being made in AI infrastructure. These concerns triggered another pullback, of around 10–15% for Nvidia and Palantir, and substantially more for other players in the sector such as Oracle.
Investors are increasingly questioning the ability of technology companies to monetise their AI investments. The early signs of increased reliance on debt, even if most spending remains financed by cash flows, also raise concerns. This is compounded by a certain degree of insularity among large technology firms, illustrated by cross-shareholdings and strategic partnerships.
On the political front, the saga surrounding tariffs has also weighed on markets in 2025, as has the record-long shutdown of the US government, which left investors and the Federal Reserve, largely deprived of economic data on the trajectory of the US economy.
Ultimately, however, corporate earnings have remained robust on both sides of the Atlantic, with third-quarter earnings season even exceeding expectations overall.
A More Contrasted Market Reality
Beneath the surface of equity indices, the picture is far more nuanced. 2025 was characterised by strong rotations between sectors and investment styles, alongside a marked underperformance of small and mid-cap stocks. In this environment, investors often found themselves wrong-footed at times.
For investors based in Swiss francs or euros, the persistent weakness of the US dollar added another layer of complexity. This was largely a consequence of erratic policy signals from President Trump and the pressure exerted on the Federal Reserve to cut interest rates.
Without currency hedging, which came at a significant cost of around 4%, most of the performance of USD-denominated assets, including US indices and many emerging market indices, was effectively wiped out. For USD-denominated bonds, annual performance measured in Swiss francs was clearly negative.
Another asset that deserves special mention is gold. Even when measured in Swiss francs, its annual performance exceeded 40%, supported notably by central bank purchases and its safe-haven status amid a complex geopolitical environment. In short, without exposure to gold, it was difficult for portfolios to shine in 2025.
A Favourable but Unusual Outlook for 2026
Looking ahead to 2026, what can investors expect?
Overall, our macroeconomic scenario remains supportive of risk assets. Economic growth should stay positive and may even strengthen slightly across major regions. Inflation is expected to continue easing towards central bank targets, allowing monetary authorities to complete their interest rate normalisation cycles. Fiscal policies also appear set to remain supportive.
Nevertheless, vigilance will remain essential. Among the risks that could unexpectedly emerge in 2026 are renewed tensions in interest rates, driven by more persistent inflation or concerns over the sustainability of certain fiscal paths or, conversely, a sharp slowdown in economic activity and employment. This risk was also highlighted by Jerome Powell, Chairman of the Federal Reserve (for a few more months), following the final monetary policy meeting of 2025.
In such a particular environment, portfolio resilience and managers’ ability to adapt to changing conditions are likely to be more important than usual, in order to navigate the coming months as smoothly as possible.