Monthly Report December 2025

After a choppy month, the S&P 500 extended its winning streak in November, adding a modest 0.1% – its seventh consecutive month of gains. At one point the index had retreated more than 5% from its October peak, but clawed back most of the losses by month-end. The wobble was triggered by concerns that the Federal Reserve might refrain from a further rate cut at its 10 December meeting. By late November, however, the probability of another 25-basis-point reduction, according to the CME FedWatch tool, had climbed back above 86%. Year-to-date, the S&P 500 was up 16.4%. The tech-heavy Nasdaq Composite shed 1.5% in November but remained ahead 21% for the year.
In Europe, the STOXX 600 gained 0.8% in November, taking its annual advance to 13.6%. The defensive Swiss market outperformed during the month: the Swiss Leader Index rose 3.4% in November and stood 8.4% higher year-to-date.
In Asia, by contrast, losses dominated. The Shanghai Composite fell 1.7%, the Nikkei 225 declined 4.3%, and South Korea’s KOSPI slipped 4.4%.

Bond markets were subdued. The yield on 10-year US Treasuries fluctuated between 4.16% and 4.00%, ending the month on the cusp of the 4% threshold. Movements in the Eurozone and Switzerland were equally muted: Italian and French yields hovered around 3.4%, while 10-year Bund yields settled between 2.6% and 2.7%. Swiss 10-year yields held just below 0.2%. Japan was the outlier, with 10-year JGB yields rising from 1.66% to 1.81%, a sign that the Bank of Japan may be inching further away from ultra-loose monetary policy.

The brief rise in equity risk aversion was mirrored in widening high yield credit spreads, which temporarily reached 3.20% in the US and 2.98% in Europe before tightening again into month-end.

Precious metals resumed their ascent after a short-lived pullback: gold climbed 5.4% in November and silver surged 16%, taking their year-to-date gains to 61% and 95%, respectively. Bitcoin – often touted as digital gold – struggled, falling 17% in November and slipping 3% into negative territory for the year.

Currency markets remained largely calm. Apart from renewed weakness in the Japanese yen, major crosses saw limited movement. The US dollar remained roughly 11% lower against the Swiss franc and the euro year-to-date.

Seasonally, December ranks among the strongest months for equities, often associated with the so-called “Santa Claus rally”. Should that pattern hold, 2025 could join 2024 and 2023 as another strikingly strong year for stock markets.

This resilience is all the more remarkable given that the past five years have included no fewer than three bear markets: the pandemic-induced crash of 2020; the correction following Russia’s attack on Ukraine and the subsequent surge in global interest rates in 2022; and the more recent sell-off surrounding “Liberation Day” in 2025. A drop of 20% or more typically marks a bear market. The swift rebounds that followed each downturn have reinforced the “buy-the-dip” mentality among retail investors.

The bullish case for 2026 remains well supplied. Expansionary fiscal policy – not least the sweeping “one big beautiful bill” tax package – is likely to exert its full cyclical force next year. The administration in the White House also appears poised to maintain a growth-friendly regulatory and fiscal stance. Earnings and margins among large-cap companies have proved robust, and valuations of many technology firms still look reasonable by historical standards. A relatively cheap oil price offers further support, as does the prospect that the Supreme Court may ease or reverse certain tariffs.

The bear case, however, is equally coherent. A renewed rise in core inflation would leave the Federal Reserve little choice but to raise interest rates again, pressuring valuations and liquidity. Market breadth remains narrow, leaving indices vulnerable: a sharp correction in a bellwether such as Nvidia could quickly sour sentiment. Corporate margins also face familiar risks – weakening household demand, new tariffs, or rising input costs. Meanwhile, “TIAA” – there is an alternative – may become more relevant: many global equity markets trade at significant discounts to the US and could begin to attract capital. Politics adds another layer of uncertainty. In the second half of his second term, Donald Trump would have fewer incentives for restraint. TACO (“Trump always chickens out”) could give way to TANCO – “Trump absolutely never chickens out”. Such an environment would carry meaningful escalation risks for markets.

Against this backdrop, intellectual flexibility is key. Instead of bold market calls for 2026, portfolio construction should prioritise robustness across a range of scenarios.

We maintain a cautiously constructive stance on equities. Alongside the core markets – the US, Europe and Switzerland – we are exploring selective allocations to emerging markets.

In fixed income, we continue to favour intermediate maturities and see scope to modestly increase investment-grade corporate exposure at the expense of government bonds. To guard against potential inflation surprises, though not our base case, we hold a small allocation to inflation-linked securities.

We complement these positions with a meaningful allocation to gold and silver, both of which provide insurance against monetary and fiscal experiments as well as geopolitical shocks.

Finally, we retain systematic trend-following strategies (CTAs) for diversification. Their historically low correlation to traditional asset classes and their ability to generate long-term positive returns make them a compelling portfolio component.