If we learnt anything from the relative performance of assets, themes and sectors in 2025 it is the consistency with which brokers, fund managers, institutional investors and high-profile commentators – paid handsomely to get it right - placed big bets on the wrong horses.
At face value this is laughable; but given that this cohort sway the court of public opinion – with mum and dad investors typically falling in line with their thinking – it is worrying and only champions the potential benefits of contrarian investment thinking in 2026.
Understandably, every investor wants to start the year off with a strong sense of what opportunities lie in the year ahead.
Global equities V the ASX
But a month is a long time in capital markets - let alone a year - and anyone who already has bold claims about what veins you should tap for the best returns this year is either an absolute genius or looking for a headline on which to grab your attention.
Admittedly, many analysts and institutions, including Morgan Stanley and J.P. Morgan Asset Management, correctly predicted that global equity markets would continue their strong performance in 2025.
Driven by moderating inflation, potential interest rate cuts, and resilient economic growth, the S&P 500 ultimately rallied nearly 18%.
By comparison, the broader Australian stock market (ASX 200) underperformed global benchmarks like the S&P 500, with a return of 6.7%.
Meanwhile, those who made big bets on gold miners and the precious metal itself were also among the most successful last year, with gold prices surging over 60%, reaching new record highs.
Drilling down into the minutiae; in Australia analysts like Owen Humphries and Paul Howard from Canaccord Genuity, and John Lawlor from Ord Minnett, came good with their profitable calls on individual stocks like defence company Electro Optic Systems (ASX: EOS) and gold miner Pantoro Gold (ASX: PNR), which delivered returns of 600% and 220% respectively.
Further afield, Goldman Sachs European Defence basket rallied a staggering 168% in 2025.
Despite a possible end to the Ukraine war, there is a strong expectation that the investment opportunities in defence – underpinned by a lifting in defence spending by European nations from 2% of GDP to well over 3.5% - extends well beyond a single year.
But for every broker or fund manager who got it right last year, there was a slew of talking heads, who made really regrettable calls.
Some financial media will happily dine out on commentary from lesser known fund managers or instos, if they can build a narrative around it they can call their own – even if it turns out to be wrong.
Crypto and bonds underwhelmed
One of the worst calls for 2025 centred around the expectation that the Trump White House would usher in a golden age for cryptocurrencies.
Given that the logic behind this strong call was compelling – flamed by the Trump-family bets on crypto and ultra-light regulations that followed – it is not surprising that so many were keen to make big calls on crypto.
Sadly, this has not played out that way anyone hoped.
While Bitcoin was down 6.7% for the year, the bottom also fell out of $TRUMP and $MELANIA meme coins which collapsed by around 90% and 99% respectively.
Meanwhile, the bond market outlook for 2025 was also left ‘yinging’ while the market was actually ‘yanging’.
What many market commentators got fundamentally wrong was their outlook for inflation, which remained stubborn.
As a result, central banks kept interest rates elevated longer than expected, and heavy government borrowing created an excess supply of bonds.
These factors contributed to higher bond yields and price volatility, which defied earlier predictions for a smooth year for fixed income.
The lessons
It is a bitter pill but what investors’ can take from 2025 is that the narrative is not the same as realised returns, and crypto was only one of a slew of big-picture narratives that failed to deliver on promised hype.
What we also learned from 2025 is that taking big calls so early in the year – or at any time – is dumb.
What clearly caught the market left footed last year were Liberation Day tariffs in April by the U.S president Donald Trump which ended up wiping a reported $9.5 trillion off global markets.
However, what followed proved even more surprising than the tariff announcement itself.
Between Liberation Day on 2 April and 2 Dec, the MSCI AC World index put on 18.3%, with emerging markets gaining 22.2%, Japan 20.2%, the U.S 18.2%, Europe 17.5% and the UK 15.4%.
Second guess everything
The key to investing successfully in 2026 is take nothing for granted, and pressure test every narrative dished up to you in media, or by those in the financial sector, who stand to gain regardless of whether their recommendations win, lose or draw.
Key fundamentals surfacing in Australia and globally that are worth second guessing before placing investment bets for 2026 include:
Gold and silver are expected to remain attractive as traditional safe-haven assets amid persistent geopolitical tensions and inflation concerns, which have driven their prices higher.
There will be a progressive rotation back into resource stocks in 2026, with commodities wired to the global energy transition - including copper, lithium, and uranium – expected to outperform.
The next rate call by the Reserve Bank will be up, not down.
Small caps on the ASX will outperform in 2026.
The investment AI narrative is shifting from the initial AI build-out to the implementation phase within companies, focusing on productivity gains and efficiency.
There’ll be a strong appetite for global listed infrastructure companies, driven by M&A activity and the demand for long-life, cash-generative assets.
With market valuations in some sectors appearing stretched, a trend is emerging towards "quality stocks" with strong balance sheets, predictable earnings, and robust cash flow, a strategy known as "growth at a reasonable price" (GARP).
While the AI sector as a whole is anticipated to experience significant growth, driven by continued high capital expenditure and innovation, not all companies within the sector will be equally successful.
Emerging markets are forecast to be the primary engine of global economic growth in 2026, with GDP growth projected around 4.4% compared to approximately 1.5% for advanced economies.
Defence stocks are positioned for a strong 2026 due to sustained, structural tailwinds like record global defence spending, ongoing geopolitical tensions, and increased demand for advanced systems such as AI and cyber security.
Private equity and private credit are positioned for strong performance in 2026 and are expected to outperform public market counterparts, with selectivity being key.
