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10th December 2025
Markets and performance in 2025
Pete Wasko, Senior Portfolio Manager, Copia Capital
Donald Trump’s return to the White House was always likely to create uncertainty. His re-election alongside a host of economic and geopolitical factors contributed to a changeable trading environment.
Nevertheless, despite pockets of volatility, most major asset classes have performed well. For us, it’s been a year where narrative-driven investing, prudent protection and thoughtful diversification have all played a role in delivering strong performances across our portfolio range. Long-term strategies have borne fruit, considered exposure has provided healthy returns and we’ve structured our portfolios to help manage the challenges. Here are some of my reflections on the market and our performance during 2025.
Lower risk strategies
At the lower end of the risk spectrum, we continued to prioritise protection in a year when volatility often flared up. Maintaining a bias towards short-dated investment-grade bonds proved valuable in navigating sticky inflation and ongoing uncertainty surrounding interest rates.
Over the past 18 months, we have gradually built exposure to government bonds, primarily gilts and treasuries, taking a measured approach given ongoing fluctuations in these markets driven by international and domestic political developments. Despite this volatility, yields have eased, particularly in 10- and 30-year maturities.
Asset-backed securities have also proved useful. Their stability and mid- to high-single-digit returns made them a reliable tool for supporting lower-risk portfolios.
Higher risk strategies
Higher up the risk spectrum, regional diversification and remaining underweight in the US have been defining features of our equity positioning.
Being underweight to US equities created some performance headwinds last year and, to a lesser extent, this year, as valuations continued to rise. Even so, we remain comfortable with this stance, particularly given the expensive valuations and meaningful concentration risk in mega-cap US tech and AI companies.
AI-driven enthusiasm has pushed valuations higher, often despite significant capital expenditure, weak revenues among startups and cyclical spending between the tech giants. The promise of breakthrough superintelligence may be compelling but returns built on speculation rather than fundamentals can introduce unnecessary risk into portfolios. Even tech leaders are urging caution, with Alphabet’s CEO Sundar Pichai recently pointing to “irrationality” in parts of the market.
By contrast, regional diversification has been rewarding.
Europe has emerged from years of austerity and over-regulation to become increasingly attractive. Large-caps and luxury brands have faced tariff-related friction, but stimulus measures, rising defence spending and supportive interest rate environments have positioned European small- and mid-caps to outperform.
Japan is another region we’ve been committed to for some time. After decades of deflationary stagnation, corporate reforms have changed the narrative. Conglomerates have unwound unproductive, non-core cross-holdings and embraced shareholder-friendly policies, such as share buybacks and dividends, and equity returns have risen, supported by attractive valuations. Our Japanese exposure has been a clear positive for some time, and we believe the reform story still has a long way to run. While the election of PM Sanae Takaichi introduces some political unknowns, we do not expect it to detract from the underlying momentum.
The UK has also been attracting renewed interest from institutional investors. We’ve seen opportunities in areas such as REITs, which are trading at significant discounts and have benefited from interest rate cuts. Defence spending has supported domestic companies, while the UK’s services-dominated economy leaves it less exposed to tariffs.
Emerging markets, particularly across Asia, have also performed strongly, supported by a weaker dollar. With the Trump administration indicating continued support for a softer dollar, the region is likely to remain well-positioned.
2025: Back to basics and playing the long game
A few clear themes have shaped our approach this year and we expect them to remain relevant going into 2026. US valuations appear vulnerable to correction. Debating whether the market can continue to defy expectations or whether any pullback would be mild or severe misses the key point: significant exposure to the US embeds unnecessary risk at this stage of the cycle.
Across our risk strategies, we have focused on approaches grounded in narrative awareness, understanding of the underlying value and with a clear path to durable returns. Regional diversity in equities alongside asset diversity through fixed income has ensured we maintain the right balance between opportunity and risk.
As the year draws to a close, uncertainty in markets is unlikely to disappear. But if 2025 has taught us anything, it’s that cutting through the noise and staying committed to long-term fundamentals remains the best way forward for 2026.
This article is intended for regulated financial advisers and investment professionals only. Copia does not provide financial advice. This information is not intended as financial advice and should not be interpreted as such.