The headlines
Investors who took on the risks of equities and held their nerve were amply rewarded in 2025 – it was a third consecutive year of double-digit returns.
British and Canadian stock markets were the standout performers thanks to their heavy weighting to financial services and to the mining sector, which profited from booming precious metal prices. European and emerging market shares also performed exceptionally well in sterling terms.
Meanwhile, America’s market darlings grabbed everyone’s attention, with tech companies Nvidia, Alphabet, Broadcom and Palantir posting eye-popping gains. But despite that, the broader US stock market had a comparatively mediocre year. What’s more, the dollar weakened significantly due to President Trump’s tariffs.
As for bonds, returns were more muted. Lending to Western governments earned you roughly 4–5% last year, pretty much in line with the interest rate you’d have received on a savings account.
The notable exception was Japan, the land of the rising yields. This is really quite unusual for Japan, where interest rate expectations have been stuck on the floor for decades. While there are some eyebrows being raised at the implications for the country’s vast debt pile, thankfully much of it is owned domestically.
But arguably the investment headline of the year was gold, which climbed roughly 70% from about $2,500 to $4,500 per troy ounce. Silver and platinum also surged about 170%, driven by similar safe-haven demand, currency debasement, rising industrial appetite and supply shortages.
How did our Global Tracker Portfolios perform?
Our portfolios with higher equity allocations outperformed their peers in 2025. They benefitted from staying agnostic towards the giant tech firms that powered the S&P 500 index. Many US shares actually declined in value over the year, especially those of so-called ‘quality’ companies with steady revenue streams.
Lower down the risk spectrum, however, our portfolios were slightly behind the peer group over the year. We think this is probably attributable to the fact that we don’t allocate to gold or hedge funds, both of which enjoyed their best returns in many years.
Over the longer term, all of our Global Tracker Portfolios have outperformed the peer group on a risk-adjusted basis, especially those with higher equity allocations.
Watch our Investments – Year in Review
Bubble talk
Hardly a week seems to go by without some new concern voiced about the prospects of companies linked to artificial intelligence (AI). Some tech companies have stratospheric share prices relative to their actual earnings, as measured by the price-to-earnings ratio. This has inevitably led to a chorus of warnings about a repeat of the dotcom crash at the start of the millennium.
While there are superficial similarities, the dotcom bubble isn’t really comparable to today’s market. Conventional wisdom has it that in the late 1990s, share valuations went through the roof as investors were swept up in internet euphoria, until, like Icarus, they flew too close to the sun and stock markets tumbled.
There is some truth to that, but the real story is more nuanced. Tech company valuations certainly became detached from reality. In March 2000, the NASDAQ plummeted; however, the broader S&P 500 index of US stocks kept ploughing on. It wasn’t until September of that year that markets started to fall more widely. Why then? What was the cause?
Part of it was certainly a continuation of tech sector woes, which had been exacerbated by the weak euro and associated declining demand from Europe – something which used to matter. But there were wider economic fears too: the price of oil had tripled from $11 to $33, and the Federal Reserve had been aggressively hiking interest rates.
Contrast that situation with today’s: interest rates are on their way down, not up. The US is now a net energy exporter, not an importer, and crude oil prices are relatively low by the standards of recent history.
This is not to insist that everything is rosy – only that it is ridiculous to try to extrapolate where we are headed based on a single number, like a price-to-earnings (PE) ratio, which tells us so vanishingly little about the wider world.
When we look back at the dotcom crash, we see in rough outline both valuations and share prices rising to a peak and then plunging. But to blame the former for the latter is like claiming tyre skid marks cause car crashes. Valuations will always fall when stocks tumble: prices are, after all, the numerator in the ‘PE’ ratio.
What really matters is not patterns in data, but good explanations. When share prices change, there will be a reason why. As Xenophanes said, “all is but a woven web of guesses”. The function of markets is to aggregate guesses of asset values. By doing so, they integrate new knowledge and correct errors better than any of us can individually. This is why it makes sense to decentralise asset allocation decisions, as index-tracking funds do.
Jevons’ Paradox and the knowledge economy
Besides, all this talk of valuations misses the woods for the trees. An excellent article by entrepreneur Aaron Levie recently made the point that the benefit of new technology isn’t so much in cost savings but the potential it unleashes.
The economist William Jevons gave his name to the apparent paradox that when new knowledge helps make resource utilisation more efficient, we consume more, not less. For instance, when technological advances meant that smaller quantities of coal were required to accomplish certain tasks, demand for the fuel actually went up.
That’s because people who had previously been priced out of coal power suddenly had access to it. They began using fossil fuels for what they had previously done laboriously by hand, if at all.
The same thing seems to be happening with knowledge jobs. The real power of AI is the massive leverage it gives to startups and to people who can’t afford to hire departments of lawyers, researchers or software developers. Now, anyone at home can call upon legions of white-collar workers at a fraction of what it cost a few years ago. Who knows what we’ll all do with it? If Jevons’ Paradox holds, demand for these services will increase – it’s just that more of us will be using zeros and ones to perform them.
Very likely, there will be many entrepreneurial failures, with just a handful of extraordinary successes. That inequality of outcome is only to be expected, which is also why we should not be unduly perturbed by the concentration of the Magnificent Seven tech firms.
Speaking of which – there are some who argue that index-tracking funds are creating their own momentum by driving up the share prices of large firms, unthinkingly distorting the market.
However, this explanation is refuted by the wide dispersion of returns last year: Alphabet was up over 60%; Amazon single digits. Tesla at one point dropped 50% but was up about 10% over the past 12 months. These are radically different numbers, which doesn’t fit the notion of index funds being some kind of snowballing force with no room for price discovery.
Summary
Rather than ruminating on the supposedly ludicrous valuations of a few high-profile revolutionary companies, whose futures are profoundly uncertain, those seeking to outsource wealth generation should diversify their investments, decentralise asset allocations and keep costs low.
Meanwhile, those looking to generate their own wealth ought to grasp the opportunities AI offers us directly, rather than second-guessing the fortunes of others.
As the philosopher Karl Popper said, “we may become the makers of our fate when we have ceased to pose as its prophets”.
About William Morris
William is Head of Investments at Weatherbys Private Bank. He has over a decade of experience encompassing investment advice, portfolio optimisation and risk modelling, and enjoys bringing this world to life in a friendly and engaging way.
What you need to know
Investments can go up and down in value and you may not get back the full amount originally invested.
Past performance is not a guide to future performance.