Explaining 2025 and preparing to take advantage of the markets in 2026 (I)
In 2025, the relative sluggishness in fixed income was offset by the appreciation of equity markets. In 2026, less contrast between asset classes is expected , and stock markets are not expected to experience a boom.
High appreciation of global stocks but with great dispersion
Indeed, the stock markets in 2025 have far exceeded the most optimistic expectations, but with enormous dispersion in the results by sectors and stocks, which has skewed the returns of the indices.The star of 2025 in the markets, without a doubt, has been the
phenomenon of Artificial Intelligence (AI) , data centers, and AI-driven commerce, which has moved the stock markets. Hence, the rise of the
S&P 500 (+17% year-to-date in USD) is explained two-thirds by the rise of technology stocks. Or, to put it another way, someone who has invested in a US equity fund focused on large pharmaceutical, industrial, and financial companies has only seen a third of the aforementioned index rise, and if, in addition, the fund manager has not hedged against the dollar, the result in euros for that investor, who reasons in euros, is clearly negative due to the fall of the US dollar by nearly -14% against the euro last year.
The European stock market has experienced a similar rise, albeit with significant disparity . Here, it wasn’t the tech sector—few big tech companies are listed in Europe—but rather the banking sector, which on average has risen by more than 80% (Stoxx Banks index) thanks to strong profit growth despite interest rate cuts. This largely explains the spectacular performance of the IBEX, which has advanced by almost 50%.
The year has also been uneven in emerging market stock exchanges , which have generally performed well but without currency hedging become a much more tepid performance.
In 2026, the stock markets, without as much momentum, should continue on this positive path.
The year 2026 presents a solid macroeconomic picture with favorable global growth, inflation generally under control and low short-term interest rates, which, in principle, are good ingredients for a positive stock market year.
That is why I believe we must continue to invest in the stock markets and continue to include equities in portfolios: the US stock market, supported by a reasonably healthy economy, albeit with less of a tech bias, and more European stocks , which offer much less demanding valuations and will benefit from an economy in the Eurozone that could exceed growth rates of 1.5% (double that of the last two years) thanks to public investment in Germany and rising disposable income with falling unemployment.
For those investors with an equity allocation in their portfolio that is not in line with their level of risk aversion, it may be a good time to increase their equity allocation, trying, of course, to time their investments correctly (always gradually), which is crucial for the success of their investments.
Caution is also key, as is avoiding complacency and seeking sound advice, since market shifts due to unexpected macroeconomic surprises can always occur (as happened in 2022, which was predicted to be favorable but ended up being a very negative year). Let’s not forget that, compared to quality active management, static buy-and-hold strategies tend to underperform due to market cycles and prolonged recessions.
Current signals favor value stocks and sectors (versus growth stocks), such as consumer staples, healthcare, automobiles, biotechnology, and listed real estate, while technology shows some short-term weakness. A potentially beneficial surprise could come from the energy sector , a market segment largely overlooked in recent times, which tends to outperform the indexes when they decline.
Finally, to get a complete picture of the stock markets in 2026, it’s essential to mention emerging market stock exchanges , especially in Asia, which are particularly attractive due to their valuations . Therefore, I believe that 2026 will most likely be the year of emerging markets , both in bonds and equities: factors such as their current currency stability, lower debt burden, low inflation, and differential growth supported by falling interest rates should facilitate this.
PS on a bit of political speculation : Spain begins 2026 with an apparently strong economy but with a political breakdown in its government that could lead to early general elections, as most Spanish citizens desire. I believe the cathartic effect this would have could have a multiplier effect on economic activity and, surely, on our stock market as well. Many will think that calling early elections is a pipe dream; they also thought so about Maduro’s arrest, and look what happened.